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Question: Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe …
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Imagine a small town in which only two residents,
Rochelle and Alec, own wells that produce safe drinking water. Each
week Rochelle and Alec work together to decide how many gallons of
water to pump. They bring the water to town and sell it at whatever
price the market will bear. To keep things simple, suppose that
Rochelle and Alec 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. If Rochelle and Alec operate as a
profit-maximizing monopoly in the market for water, what price will
they charge?

 a. \$25 b. \$30 c. \$35 d. \$40

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