Jenny Sells Lemonade in Front of Her House in the Summer

Multiple Choice

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?

A) Everyone will start to charge 50 cents to maximize revenue.
B) A price war will break out, and all of the kids will lower their prices.
C) Each kid will keep his or her price at the original amount.
D) Eventually prices will equalize across all three lemonade stands.