According to the information provided, suppose only one resident owns all the wells in town.Which of the following statements is most likely going to be true of the market for water?
A)the seller will be able to earn unlimited profit
B)the price of a gallon of water will be driven to equal its marginal cost
C)the price of a gallon of water will exceed its marginal cost
D)since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised

Question

Quizplus · Accepted Answer

When one resident owns all the wells in town, they have a monopoly on the market for water. This gives them the ability to raise the price of water above its marginal cost, allowing them to earn excess profits. Therefore, the price of a gallon of water will likely exceed its marginal cost.

According to the Information Provided, Suppose Only One Resident Owns