Homework Help is Here – Start Your Trial Now!
Business
Economics
Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa can pump and sell as nuch 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa form a cartel and behave as a monopolist. The profit-maximizing price is $ | gallons. As part of their cartel agreement, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $ per gallon, and the total output Suppose that Sam and Teresa 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, Sam says to himself, "Teresa and I aren't the best of friends anyway. If I increase my production to 35 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Sam implements his new plan, the price of water Sam's profit becomes $ per gallon. Given Teresa and Sam's production levels, to and Teresa's profit becomes $

Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa can pump and sell as nuch 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa form a cartel and behave as a monopolist. The profit-maximizing price is $ | gallons. As part of their cartel agreement, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $ per gallon, and the total output Suppose that Sam and Teresa 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, Sam says to himself, "Teresa and I aren't the best of friends anyway. If I increase my production to 35 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Sam implements his new plan, the price of water Sam's profit becomes $ per gallon. Given Teresa and Sam's production levels, to and Teresa's profit becomes $

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

Handwritten plzzz asap...i'll give you upvote asap plzzzzzz

1. price of water to - decreases - increases 2. the behavior is an example of - a prisoner's dilemma -tying -a tit-for-tat strategy -a dominant strategy
Transcribed Image Text:1. price of water to - decreases - increases 2. the behavior is an example of - a prisoner's dilemma -tying -a tit-for-tat strategy -a dominant strategy
3. Breakdown of a cartel agreement Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa 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, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $ Suppose that Sam and Teresa 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, Sam says to himself, "Teresa and I aren't the best of friends anyway. If I increase my production to 35 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." per gallon. Given Teresa and Sam's production levels, After Sam implements his new plan, the price of water Sam's profit becomes $ ▼ to $ and Teresa's profit becomes $ Because Sam has deviated from the cartel agreement and increased his output of water to 35 gallons more than the cartel amount, Teresa decides that she will also increase her production to 35 gallons more than the cartel amount. After Teresa increases her production, Sam's profit becomes $ of the profits of Sam and Teresa) is now $ Teresa's profit becomes $ |, and total profit (the sum True or False: Based on the fact that both Sam and Teresa increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. O True O False Note that Sam and Teresa started by behaving cooperatively. However, once Sam decided to cheat, Teresa decided to cheat as well. In other words, Teresa's output decisions are based on Sam's actions. This behavior is an example of
Transcribed Image Text:3. Breakdown of a cartel agreement Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa 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, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $ Suppose that Sam and Teresa 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, Sam says to himself, "Teresa and I aren't the best of friends anyway. If I increase my production to 35 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." per gallon. Given Teresa and Sam's production levels, After Sam implements his new plan, the price of water Sam's profit becomes $ ▼ to $ and Teresa's profit becomes $ Because Sam has deviated from the cartel agreement and increased his output of water to 35 gallons more than the cartel amount, Teresa decides that she will also increase her production to 35 gallons more than the cartel amount. After Teresa increases her production, Sam's profit becomes $ of the profits of Sam and Teresa) is now $ Teresa's profit becomes $ |, and total profit (the sum True or False: Based on the fact that both Sam and Teresa increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. O True O False Note that Sam and Teresa started by behaving cooperatively. However, once Sam decided to cheat, Teresa decided to cheat as well. In other words, Teresa's output decisions are based on Sam's actions. This behavior is an example of
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Sequential Game
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
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
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)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
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-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS