Suppose Nick and Rosa form a cartel and behave as a monopolist. The profit-maximizing price is $ | gallons. As part of their cartel agreement, Nick and Rosa agree to split production equally. Therefore, Nick's profit is $ Rosa's profit is $ per gallon, and the total output is and Suppose that Nick and Rosa 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, Nick says to himself, "Rosa 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 Rosa and Nick's production levels, Nick's After Nick implements his new plan, the price of water profit becomes $ to $ and Rosa's profit becomes $ Because Nick has deviated from the cartel agreement and increased his output of water to 35 gallons more than the cartel amount, Rosa decides that she will also increase her production to 35 gallons more than the cartel amount.

Suppose Nick and Rosa form a cartel and behave as a monopolist. The profit-maximizing price is $ | gallons. As part of their cartel agreement, Nick and Rosa agree to split production equally. Therefore, Nick's profit is $ Rosa's profit is $ per gallon, and the total output is and Suppose that Nick and Rosa 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, Nick says to himself, "Rosa 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 Rosa and Nick's production levels, Nick's After Nick implements his new plan, the price of water profit becomes $ to $ and Rosa's profit becomes $ Because Nick has deviated from the cartel agreement and increased his output of water to 35 gallons more than the cartel amount, Rosa decides that she will also increase her production to 35 gallons more than the cartel amount.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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