Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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 (Dollars per gallon) 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 quantity Th 0.50 0.25 0 Quantity Demanded (Gallons of water) 0 50 100 150 200 I 250 300 350 400 450 500 550 600 Suppose Jacques and Kyoko form a cartel and behave as a monopolist. The profit-maximizing price is $ output is $ Total Revenue (Dollars) 0 $137.50 $250.00 $337.50 $400.00 $437.50 $450.00 $437.50 $400.00 $337.50 $250.00 $137.50 0 per gallon, and the total gallons. As part of their cartel agreement, Jacques and Kyoko agree to split production equally. Therefore, Jacques's profit is and Kyoko's profit is $ Suppose that Jacques and Kyoko have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly Jacque himself "Kyoko
Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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 (Dollars per gallon) 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 quantity Th 0.50 0.25 0 Quantity Demanded (Gallons of water) 0 50 100 150 200 I 250 300 350 400 450 500 550 600 Suppose Jacques and Kyoko form a cartel and behave as a monopolist. The profit-maximizing price is $ output is $ Total Revenue (Dollars) 0 $137.50 $250.00 $337.50 $400.00 $437.50 $450.00 $437.50 $400.00 $337.50 $250.00 $137.50 0 per gallon, and the total gallons. As part of their cartel agreement, Jacques and Kyoko agree to split production equally. Therefore, Jacques's profit is and Kyoko's profit is $ Suppose that Jacques and Kyoko have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly Jacque himself "Kyoko
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
3. Breakdown of a cartel agreementConsider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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
|
Transcribed Image Text:3. Breakdown of a cartel agreement
Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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)
3.00
2.75
50
$137.50
2.50
100
$250.00
2.25
150
$337.50
2.00
200
$400.00
1.75
250
$437.50
1.50
300
$450.00
1.25
350
$437.50
1.00
400
$400.00
0.75
450
$337.50
0.50
500
$250.00
0.25
550
$137.50
600
Suppose Jacques and Kyoko 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, Jacques and Kyoko agree to split production equally. Therefore, Jacques's profit is
and Kyoko's profit is $
Suppose that Jacques and Kyoko 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, Jacques says to himself, "Kyoko and I aren't the best of friends anyway. If I increase my production to
50 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."
%3D
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education