Scenario 15-1
Consider the market for water in a small town in the Old West.Assume that the only source of water is the underground aquifer that lies directly below the town.Wells are used to supply water to the entire town.
-Refer to Scenario 15-1.What happens if only one resident owns all the wells in town

Question

Quizplus · Accepted Answer

If only one resident owns all the wells in town, they will have a monopoly and be able to set the price higher than the marginal cost to maximize their profit. The lack of competition means that the price will be higher than it would be in a competitive market. However, it's important to note that if the price is raised too high, the quantity of water consumed may decline as consumers look for alternatives.

Scenario 15-1 Consider the Market for Water in a Small Town in Town