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1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC = 0). The market demand schedule is given as: Quantity (gallon) 30 Price ($) 90 40 80 50 70 60 70 60 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output.

1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC = 0). The market demand schedule is given as: Quantity (gallon) 30 Price ($) 90 40 80 50 70 60 70 60 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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*YOU ONLY NEED TO ANSWER QUESTION B*

1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC= 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. a. How much would each firm produce if they form the cartel? Why?
Transcribed Image Text:1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC= 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. a. How much would each firm produce if they form the cartel? Why?
b. Find the cartel market outcome: market quantity, price, and each firm's profit.
Transcribed Image Text:b. Find the cartel market outcome: market quantity, price, and each firm's profit.
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