Its in the picture. True or False: Based on the fact that both Dmitri and Frances increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO FalseDmitri and Frances have each cheated on their cartel agreement and increased production by 45 gallons more than the cartel amount. However, theyboth realize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, considerDmitri's profit when he produces 90 gallons more than the cartel amount compared to his profit when he produces 45 gallons more than the cartelamount.)Neither Dmitri nor Frances has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is anexample of 3. Breakdown of a cartel agreementConsider a town in which only two residents, Dmitri and Frances, own wells that produce water safe for drinking. Dmitri and Frances can pump and sellas 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.PriceQuantity Demanded Total Revenue(Dollars per gallon)(Gallons of water)(Dollars)6.005.5045$247.505.0090$450.004.50135$607.504.00180$720.003.50225$787.503.00270$810.002.50315$787.502.00360$720.001.50405$607.501.00450$450.000.50495$247.50540Suppose Dmitri and Frances form a cartel and behave as a monopolist. The profit-maximizing price is Sper gallon, and the totalgallons. As part of their cartel agreement, Dmitri and Frances agree to split production equally. Therefore, Dmitri's profit isand Frances's profit is Soutput is%24Suppose that Dmitri and Frances 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, Dmitri says to himself, "Frances and I aren't the best of friends anyway. If I increase my production to45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."After Dmitri implements his new plan, the price of waterlevels, Dmitri's profit becomes Sto $per gallon. Given Frances and Dmitri's productionand Frances's profit becomes $Because Dmitri has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Frances decidesthat she will also increase her production to 45 gallons more than the cartel amount.After Frances increases her production, Dmitri's profit becomes ssum of the profits of Dmitri and Frances) is now sFrances's profit becomesand total profit (the

The following problem has been solved as follows:

rue or False: Based on the fact that both Dmitri and Frances increased production from the initial cartel quantity, you know that the output effect w erger than the price effect at that quantity. O True O False mitri and Frances have each cheated on their cartel agreement and increased production by 45 gallons more than the cartel amount. However, they oth realize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider mitri's profit when he produces 90 gallons more than the cartel amount compared to his profit when he produces 45 gallons more than the cartel mount.) leither Dmitri nor Frances has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is an xample of

rue or False: Based on the fact that both Dmitri and Frances increased production from the initial cartel quantity, you know that the output effect w erger than the price effect at that quantity. O True O False mitri and Frances have each cheated on their cartel agreement and increased production by 45 gallons more than the cartel amount. However, they oth realize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider mitri's profit when he produces 90 gallons more than the cartel amount compared to his profit when he produces 45 gallons more than the cartel mount.) leither Dmitri nor Frances has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is an xample of

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 7PA

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3. Breakdown of a cartel agreement Consider a town in which only two residents, Jake and Latasha, own wells that produce water safe for drinking. Jake and Latasha 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 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Jake and Latasha 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, Jake and Latasha agree to split production equally. Therefore, Jake's profit is , and Latasha's profit is . Suppose that Jake and…
3. Breakdown of a cartel agreement Consider a town in which only two residents, Daniel and Gabrielle, own wells that produce water safe for drinking. Daniel and Gabrielle 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) Quantity Demanded Total Revenue (Gallons of water) (Dollars) 4.20 0 0 3.85 40 $154.00 3.50 80 $280.00 3.15 120 $378.00 2.80 160 $448.00 2.45 200 $490.00 2.10 240 $504.00 1.75 280 $490.00 1.40 320 $448.00 1.05 360 $378.00 0.70 400 $280.00 0.35 440 $154.00 0 480 0 Suppose Daniel and Gabrielle form a cartel and behave as a monopolist. The profit-maximizing price is $ output is per gallon, and the total gallons. As part of their cartel agreement, Daniel and Gabrielle agree to split production equally. Therefore, Daniel's profit is and Gabrielle's profit is $
3. Breakdown of a cartel agreement Consider a town in which only two residents, Musashi and Rina, own wells that produce water safe for drinking. Musashi and Rina 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 Musashi and Rina 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, Musashi and Rina agree to split production equally. Therefore, Musashi's profit is %2$ , and Rina's profit is $
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3. Breakdown of a cartel agreement Consider a town in which only two residents, Carlos and Deborah, own wells that produce water safe for drinking. Carlos and Deborah 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 per gallon, and the total Suppose Carlos and Deborah form a cartel and behave as a monopolist. The profit-maximizing price is $ output is gallons. As part of their cartel agreement, Carlos and Deborah agree to split production equally. Therefore, Carlos's profit is 24 and Deborah's profit is $ orice and sell half of the monopoly Suppose that Carlos and Deborah have been successfully…
7. Breakdown of a cartel agreement Consider a town in which only two residents, Clancy and Eileen, own wells that produce water safe for drinking. Clancy and Eileen 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) 6.00 0 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 0 Suppose Clancy and Eileen 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, Clancy and Eileen agree to split production equally. Therefore, Clancy's profit is $ and Eileen's profit is $ Suppose that Clancy and Eileen have been successfully operating as a cartel. They each charge…
6. The cartel Consider a town in which only two residents, Rajiv and Simone, own wells that produce water safe for drinking. Rajiv and Simone 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) 6.00 Quantity Demanded Total Revenue (Gallons of water) (Dollars) 0 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 0 Suppose Rajiv and Simone 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, Rajiv and Simone agree to split production equally. Therefore, Rajiv's profit is $ and Simone's profit is $ Suppose that Rajiv and Simone have been successfully operating as a cartel. They each charge the monopoly price and sell half of…
Breakdown of a cartel agreement Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette 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 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Sean and Yvette 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, Sean and Yvette agree to split production equally. Therefore, Sean's profit is $ __________ , and Yvette's profit is __________ .…
3. Breakdown of a cartel agreement Consider a town in which only two residents, Van and Amy, own wells that produce water safe for drinking. Van and Amy 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) 6.00 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 $247.50 540 Suppose Van and Amy form a cartel and behave as a monopolist. The profit-maximizing price is S per gallon, and the total output is gallons. As part of their cartel agreement, Van and Amy agree to split production equally. Therefore, Van's profit is s and Amy's profit is $ Suppose that Van and Amy have been successfully operating as a cartel. They each charge the monopoly price and sell half of the…
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1. Rio live in a town with 300 adults and 200 children, and he is thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000 except all cost like maintenance costs until two years, but selling an extra ticket has zero marginal cost. Here are the demand schedules for his two types of customer: Price Adults Children $10 9 100 8 200 7 300 6 300 300 100 4 300 200 300 200 300 200 1 300 200 300 200 a. To maximize profit, what price would he charge for an adult ticket? For a child's ticket? How much the profit? (Hint: total cost for this year include fixed cost) b. Suppose in this year, the city council passes a law prohibiting him from charging different prices to different customers. What price does he set for a ticket now? How much profit now? (Hint: when quantity of produced yield maximum revenue or the sum of these both revenues sastify)
1. Rio live in a town with 300 adults and 200 children, and he is thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000 except all cost like maintenance costs until two years, but selling an extra ticket has zero marginal cost. Here are the demand schedules for his two types of customer: Price Adults Children $10 9. 100 8 200 7 300 300 300 100 4 300 200 300 200 300 200 1 300 200 300 200 c. Suppose next year government imposes tax equals $4 for selling an every extra ticket, what price would he charge for an adult ticket? For a child's ticket? How much the profit? Assume the law prohibiting him from charging different prices to different customers doesn't exist. (Hint: fixed cost doesn't include)