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 weekly town demand schedule and total revenue schedule for water is shown in the table below:

-Refer to Table 17-1.If the market for water were perfectly competitive instead of monopolistic,how many gallons of water would be produced and sold?
A) 0
B) 600
C) 900
D) 1,200

Question

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 weekly town demand schedule and total revenue schedule for water is shown in the table below:
 
-Refer to Table 17-1.If the market for water were perfectly competitive instead of monopolistic,how many gallons of water would be produced and sold?
A) 0 
B) 600 
C) 900 
D) 1,200

Quizplus · Accepted Answer

In a perfectly competitive market, the quantity produced is where the price equals marginal cost. Typically, this results in a higher quantity than in a monopolistic market, where the quantity is set where marginal revenue equals marginal cost. Hence, the maximum quantity, 1,200 gallons, would be produced and sold.

Table 17-1 Imagine a Small Town in Which Only Two Residents, Rochelle