Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj 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 are shown in the table below.

-Refer to Table 17-5.Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water,what price will they charge for water?
A) $2
B) $4
C) $6
D) $7

Question

Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj 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 are shown in the table below.
 
-Refer to Table 17-5.Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water,what price will they charge for water?
A) $2 
B) $4 
C) $6 
D) $7

Quizplus · Accepted Answer

In a monopoly, the profit-maximizing price is set where marginal cost equals marginal revenue. Without the specific table data, the typical approach is to choose the price where this condition is met, which is often higher than the competitive equilibrium price. In many textbook examples, $6 is a common monopoly price.