Table 17-1
Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water is reflected in the table.

-Refer to Table 17-1.As long as Matthew and Anna operate as a profit-maximizing monopoly,what will their weekly revenue equal
A)$200
B)$270
C)$320
D)$360

Question

Table 17-1
Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water is reflected in the table.

-Refer to Table 17-1.As long as Matthew and Anna operate as a profit-maximizing monopoly,what will their weekly revenue equal
A)$200 
B)$270 
C)$320 
D)$360

Quizplus · Accepted Answer

To maximize their profits as a monopoly, Matthew and Anna will want to produce where their marginal revenue equals their marginal cost, which is zero in this case. Looking at the table, the quantity at which the marginal revenue equals zero is 12 liters of water, as this is the quantity at which the total revenue reaches its maximum value of $360. Therefore, their best choice is to produce and sell 12 liters of water each week, resulting in a total revenue of $360.

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