QUESTION 14 Table 171 Imagine a small town in which only two

QUESTION 14 Table 17-1 Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The town\'s weekly demand schedule and total revenue schedule for water is shown in the table below: Quantity in gallons) Total Revenue (and Total Profit) S0 5,500 10,000 13,500 16,000 17,500 18,000 17,500 16,000 13,500 10,000 5,500 Price $60 100 50 35 30 25 20 1,000 1,100 1,200 Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. What will be the price of water once Rochelle and Alec reach a Nash equilibrium? a. $25 b. $30 C. $20 d. $15

Solution

Ans 15)

Chosen ans is correct

Ans 17)

Option C is correct answer

Ans 18)

Option A is correct response

Ans 16)

Option B is correct as MR curve intersects MC curve

Q	FC	VC	TC	AFC	AVC	ATC	MC
1	10	23	33	10	23	33
2	10	38	48	5	19	24	15
3	10	60	70	3.333333333	20	23.33333333	22
4	10	64	74	2.5	16	18.5	4
5	10	100	110	2	20	22	36
6	10	118	128	1.666666667	19.66666667	21.33333333	18
7	10	143	153	1.428571429	20.42857143	21.85714286	25
8	10	175	185	1.25	21.875	23.125	32