Price (Dollars per gallon) Quantity Demanded (Gallons of water) Total Revenue 6.00 (Dollars) 0 5.50 45 $247.50 5.00 90 $450.00 4.50 135 $607.50 4.00 180 $720.00 3.50 225 $787.50 3.00 270 $810.00 2.50 315 $787.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 0.50 495 $247.50 0 540 Suppose Daniel and Gabrielle form a cartel and behave as a monopolist. The profit-maximizing price is output is gallons. As part of their cartel agreement, Daniel and Gabrielle agree to split production equally. Therefore, Da per ga and Gabrielle's profit is s is Suppose that Daniel and Gabrielle have been successfully operating as a cartel. They each charge the monopoly price and sell ha quantity. Then one night before going to sleep, Daniel says to himself, "Gabrielle and I aren't the best of friends anyway. If I incre 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomom to s per gallon. Given Gabrielle and Da and Gabrielle's profit becomes s After Daniel implements his new plan, the price of water levels, Daniel's profit becomes s Because Daniel has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amo that she will also increase her production to 45 gallons more than the cartel amount. After Gabrielle increases her production, Daniel's profit becomes s (the sum of the profits of Daniel and Gabrielle) is now s Gabrielle's profit becomes True or False: Based on the fact that both Daniel and Gabrielle increased production from the initial cartel quantity, you know that was smaller than the price effect at that quantity. True False Note that Daniel and Gabrielle started by behaving cooperatively. However, once Daniel decided to cheat, Gabrielle decided to chea words, Gabrielle's output decisions are based on Daniel's actions. This behavior is an example of
Price (Dollars per gallon) Quantity Demanded (Gallons of water) Total Revenue 6.00 (Dollars) 0 5.50 45 $247.50 5.00 90 $450.00 4.50 135 $607.50 4.00 180 $720.00 3.50 225 $787.50 3.00 270 $810.00 2.50 315 $787.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 0.50 495 $247.50 0 540 Suppose Daniel and Gabrielle form a cartel and behave as a monopolist. The profit-maximizing price is output is gallons. As part of their cartel agreement, Daniel and Gabrielle agree to split production equally. Therefore, Da per ga and Gabrielle's profit is s is Suppose that Daniel and Gabrielle have been successfully operating as a cartel. They each charge the monopoly price and sell ha quantity. Then one night before going to sleep, Daniel says to himself, "Gabrielle and I aren't the best of friends anyway. If I incre 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomom to s per gallon. Given Gabrielle and Da and Gabrielle's profit becomes s After Daniel implements his new plan, the price of water levels, Daniel's profit becomes s Because Daniel has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amo that she will also increase her production to 45 gallons more than the cartel amount. After Gabrielle increases her production, Daniel's profit becomes s (the sum of the profits of Daniel and Gabrielle) is now s Gabrielle's profit becomes True or False: Based on the fact that both Daniel and Gabrielle increased production from the initial cartel quantity, you know that was smaller than the price effect at that quantity. True False Note that Daniel and Gabrielle started by behaving cooperatively. However, once Daniel decided to cheat, Gabrielle decided to chea words, Gabrielle's output decisions are based on Daniel's actions. This behavior is an example of
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Price
(Dollars per gallon)
Quantity Demanded
(Gallons of water)
Total Revenue
6.00
(Dollars)
0
5.50
45
$247.50
5.00
90
$450.00
4.50
135
$607.50
4.00
180
$720.00
3.50
225
$787.50
3.00
270
$810.00
2.50
315
$787.50
2.00
360
$720.00
1.50
405
$607.50
1.00
450
$450.00
0.50
495
$247.50
0
540
Suppose Daniel and Gabrielle form a cartel and behave as a monopolist. The profit-maximizing price is
output is
gallons. As part of their cartel agreement, Daniel and Gabrielle agree to split production equally. Therefore, Da
per ga
and Gabrielle's profit is s
is
Suppose that Daniel and Gabrielle have been successfully operating as a cartel. They each charge the monopoly price and sell ha
quantity. Then one night before going to sleep, Daniel says to himself, "Gabrielle and I aren't the best of friends anyway. If I incre
45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomom
to s
per gallon. Given Gabrielle and Da
and Gabrielle's profit becomes s
After Daniel implements his new plan, the price of water
levels, Daniel's profit becomes s
Because Daniel has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amo
that she will also increase her production to 45 gallons more than the cartel amount.
After Gabrielle increases her production, Daniel's profit becomes s
(the sum of the profits of Daniel and Gabrielle) is now s
Gabrielle's profit becomes
True or False: Based on the fact that both Daniel and Gabrielle increased production from the initial cartel quantity, you know that
was smaller than the price effect at that quantity.
True
False
Note that Daniel and Gabrielle started by behaving cooperatively. However, once Daniel decided to cheat, Gabrielle decided to chea
words, Gabrielle's output decisions are based on Daniel's actions.
This behavior is an example of
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