plz solve it within 30-40 mins I'll give you multiple upvote.... 3. Breakdown of a cartel agreementConsider 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 asmuch water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.PriceQuantity DemandedTotal Revenue(Dollars per gallon)(Gallons of water)(Dollars)3.603.3035$115.503.0070$210.002.70105$283.502.40140$336.002.10175$367.501.80210$378.001.50245$367.501.20280$336.000.90315$283.500.60350$210.000.30385$115.50420Suppose Sam and Teresa form a cartel and behave as a monopolist. The profit-maximizing price is $per gallon, and the total outputisgallons. 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 monopolyquantity. 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 35gallons 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 waterSam'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 decidesthat 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 sumTrue or False: Based on the fact that both Sam and Teresa increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO FalseNote 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 1. price of waterto- decreases- increases2. the behavior is an example of- a prisoner's dilemma-tying-a tit-for-tat strategy-a dominant strategy

Disclaimer: Since it is a multipart question, I am providing you with the answer to the first three…

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 $

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 $

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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Question

plz solve it within 30-40 mins I'll give you multiple upvote....

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

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

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