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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
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. Weekly Weekly Quantity Total Revenue (in litres) Price (and Total Profit) 0 512 50 10 511 $110 20 510 5200 30 $9 5270 40 $8 5320 S50 $7 8350 60 $6 5360 70 $5 5350 80 $4 $320 100 $2 5200 110 $1 $110 120 50 $0 100, Refer to the above table. If Matthew and Anna operate as a profit-maximizing monopoly in the market for water, what price will they charge to sell 80 litres of water? a. 52 b. %4 C. 56 d. 57 95. What is the term for the practice of selling the same goods to different customers at different prices but at the same marginal cost? a. price differentiation b. price discrimination C. arbitrage d. monopoly pricing @ @& & @ ey 96. Refer to the above figure. When would firms be encouraged to enter this market? a. for all prices that exceed P2 b. for all prices that exceed P3 B for all prices that exceed P4 d. for all prices that exceed P5
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