Table 17-1
Imagine a small town in which only two residents, Celia and Venya, own wells that produce safe drinking water. Each week Celia and Venya 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 Celia and Venya can pump as much water as they want without cost so that the marginal cost of water equals zero. The town's weekly demand schedule and total revenue schedule for water is shown in the following table:
Quantity (Gallons) | Price (Dollars per gallon) | Total Revenue and Total Profit (Dollars)
0 | 36 | 0
40 | 33 | 1,320
80 | 30 | 2,400
120 | 27 | 3,240
160 | 24 | 3,840
200 | 21 | 4,200
240 | 18 | 4,320
280 | 15 | 4,200
320 | 12 | 3,840
360 | 9 | 3,240
400 | 6 | 2,400
440 | 3 | 1,320
480 | 0 | 0
Refer to Table 17-1. If Celia and Venya operate as a profit-maximizing monopoly in the market for water, what price will they charge?
a. $15
b. $18
c. $12
d. $21