Table 16-4
Imagine a small town in which only two residents, Tony and Jill, own wells that produce safe drinking water. Each week Tony and Jill 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. To keep things simple, suppose that Tony and Jill 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 16-4.If the market for water were perfectly competitive instead of monopolistic,how many gallons of water would be produced and sold?
A)70
B)90
C)110
D)120

Question

Table 16-4
Imagine a small town in which only two residents, Tony and Jill, own wells that produce safe drinking water. Each week Tony and Jill 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. To keep things simple, suppose that Tony and Jill 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 16-4.If the market for water were perfectly competitive instead of monopolistic,how many gallons of water would be produced and sold?
A)70 
B)90 
C)110 
D)120

Quizplus · Accepted Answer

In a perfectly competitive market, the quantity produced is where marginal cost equals demand. Typically, this results in a higher quantity than in a monopolistic market, where the monopolist restricts output to maximize profit. Therefore, the highest quantity option, 120 gallons, is likely the correct answer.

Table 16-4 Imagine a Small Town in Which Only Two Residents, Tony