Question

Consider a town in which only two residents, Brian and Crystal, own wells that produce water safe for drinking. Brian and Crystal can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.

Answer 1

Based on the quantity demanded and total revenue to Brian and Crystal, the profit-maximizing price is $1.80 per gallon. The total output is 210 gallons and Brian and Crystal's profits are $189 each.

What does the table on the demand schedule show?

The profit-maximizing price is the price at which the highest revenue was acquired which is $1.80.

The total output at this price is 210 gallons.

The profit going to Bryan and Crystal is half each which is:

= 378 / 2

= $189

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