Table 17-5.Imagine a small town in which only two residents,Bill and Ben,own wells that produce safe drinking water.Each week Bill and Ben 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 Bill and Ben 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.As long as Bill and Ben operate as a profit-maximizing monopoly,what will their combined weekly revenue amount to?
A) $200
B) $270
C) $350
D) $360

Question

Table 17-5.Imagine a small town in which only two residents,Bill and Ben,own wells that produce safe drinking water.Each week Bill and Ben 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 Bill and Ben 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.As long as Bill and Ben operate as a profit-maximizing monopoly,what will their combined weekly revenue amount to?
A) $200 
B) $270 
C) $350 
D) $360

Quizplus · Accepted Answer

To determine the profit-maximizing quantity of water to sell, Bill and Ben should produce the amount at which marginal revenue equals marginal cost. Since the marginal cost of water is zero, they should continue to produce until the marginal revenue is also zero.

Looking at the revenue schedule, we can see that when Bill and Ben sell a total of 12 gallons of water per week, their total revenue is $360. This is the profit-maximizing quantity of water to sell, so the combined weekly revenue amount will be $360. Therefore, the answer is D) $360.