Bb My Blackboard Content - BI OMonopolistic Competition- MindTap - Cengage Learnin MindTap - Cengage Lea X //ng.cengage.com/static/nb/ui/evo/index.html?deploymentld%3D5832652452122894247646222&elSBN=9781337914413&id%36560712388snapshot CENGAGE MINDTAP LE Aplia Homework: Monopolistic Competition and Oligopoly Q Search this cou 0.45 440 198 480 Suppose Eric and Ginny form a cartel and behave as a monopolist. The profit-maximizing price is $ is gallons. As part of their cartel agreement, Eric and Ginny agree to split production equally. Therefore, Eric's profit is $ per gallon, and the total output and Ginny's profit is $ Suppose that Eric and Ginny have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Eric says to himself, "Ginny and I aren't the best of friends anyway. If I increase my production to 40 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Eric implements his new plan, the price of water to $ per gallon. Given Ginny and Eric's production levels, Eric's profit becomes $ and Ginny's profit becomes $ Because Eric has deviated from the cartel agreement and increased his output of water to 40 gallons more than the cartel amount, Ginny decides that she will also increase her production to 40 gallons more than the cartel amount. After Ginny increases her production, Eric's profit becomes $ Ginny's profit becomes $ and total profit (the sum of the profits of Eric and Ginny) is now $ Note that Eric and Ginny started by behaving cooperatively. However, once Eric decided to cheat, Ginny decided to cheat as well. In other words, Ginny's output decisions are based on Eric's actions. This behavior is an example of Grade It Now Save & Continue Continue without saving 7:55 PM 5/2/2020 Home F9 End F10 PgUp F11 PGD F12 DII PrtScn F3 F4 F5 F6 F7 F8 # 8. R Y U Bb My Blackboard Content - BI Monopolistic Competition- MindTap - Cengage Learnin MindTap - Cengage Lea X+ attps://ng.cengage.com/static/nb/ui/evo/index.html?deploymentld%3D5832652452122894247646222&elSBN=9781337914413&id%3D656071238&snapshot * CENGAGE MINDTAP Aplia Homework: Monopolistic Competition and Oligopoly 6. Breakdown of a cartel agreement Consider a town in which only two residents, Eric and Ginny, own wells that produce water safe for drinking. Eric and Ginny 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. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 5.40 4.95 40 198 4.50 80 360 4.05 120 486 3.60 160 576 3.15 200 630 2.70 240 648 2.25 280 630 1.80 320 576 1.35 360 486 0.90 400 360 0.45 440 198 480 Suppose Eric and Ginny form a cartel and behave as a monopolist. The profit-maximizing price is $ per gallon, and the total output is gallons. As part of their cartel agreement, Eric and Ginny agree to split production equally. Therefore, Eric's profit is $ and Ginny's profit is $ ch PgUp F11 End DII F3 PrtScn F8 Home F9 F10 F4 F5 F6 F7 F2 %23 2$ & 5 8. 9. E R T Y U