Consider the accompanying table. You are the only provider of bottled water for three cities. Because you have access to a natural spring, the marginal cost to produce an additional bottle is $0. How many bottles of water would you need to produce to maximize your profits and at what price would you sell it? $\text { Willingness to Pay for Bottled Water }$
$\begin{array}{lccc}
\text { Quantity } & \text { City A } & \text { City B } & \text { City C } \
1 & \$ 20 & \$ 15 & \$ 14 \
2 & \$ 17 & \$ 13 & \$ 13 \
3 & \$ 14 & \$ 11 & \$ 12 \
4 & \$ 11 & \$ 9 & \$ 11 \
5 & \$ 8 & \$ 7 & \$ 10
\end{array}$
$\text { Marginal Cost }=\$ 0$

Question

Quizplus · Accepted Answer

To maximize profits, produce until the price equals marginal cost. Since the marginal cost is $0, produce until the price is just above $0. The highest price where all cities are willing to buy is $11 for 11 bottles (4 from City A, 4 from City B, and 3 from City C).

Consider the Accompanying Table Willingness to Pay for Bottled Water \text { Willingness to Pay for Bottled Water } Willingness to Pay for Bottled Water

Consider the Accompanying Table $\text { Willingness to Pay for Bottled Water }$