The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sell water in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constant and equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, total revenue is equal to total profit. Price (per gallon) Quantity (gallons) Total Revenue (TR) $0.25 1000 $250.00 $0.50 900 $450.00 $0.75 800 $600.00 $1.00 700 $700.00 $1.25 600 $750.00 $1.50 500 $750.00 $1.75 400 $700.00 $2.00 300 $600.00 $2.25 200 $450.00 $2.50 100 $250.00 $2.75 $0.00
The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sell water in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constant and equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, total revenue is equal to total profit. Price (per gallon) Quantity (gallons) Total Revenue (TR) $0.25 1000 $250.00 $0.50 900 $450.00 $0.75 800 $600.00 $1.00 700 $700.00 $1.25 600 $750.00 $1.50 500 $750.00 $1.75 400 $700.00 $2.00 300 $600.00 $2.25 200 $450.00 $2.50 100 $250.00 $2.75 $0.00
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter11: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 9CQ
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Question
Assume Waterland and Aquataste make a nonbinding, informal agreement that each will produce 250 gallons of water, charge $1.50 per gallon, and evenly split the profit of $750.
If Aquataste sticks to the agreement, Waterland has an incentive to renege on the agreement by producing 350 gallons because Waterland’s profits would then increase from $375 to $______ . (Provide your answer to two decimal places.)
![The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sell
water in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constant
and equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, total
revenue is equal to total profit.
Price (per gallon)
Quantity (gallons)
Total Revenue (TR)
$0.25
1000
$250.00
$0.50
900
$450.00
$0.75
800
$600.00
$1.00
700
$700.00
$1.25
600
$750.00
$1.50
500
$750.00
$1.75
400
$700.00
$2.00
300
$600.00
$2.25
200
$450.00
$2.50
100
$250.00
$2.75
$0.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b6ca244-87da-4152-8366-428e034a9ca1%2Ff2942e14-7bf2-4950-9670-b7a33f775a8c%2Fo5tgoso.png&w=3840&q=75)
Transcribed Image Text:The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sell
water in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constant
and equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, total
revenue is equal to total profit.
Price (per gallon)
Quantity (gallons)
Total Revenue (TR)
$0.25
1000
$250.00
$0.50
900
$450.00
$0.75
800
$600.00
$1.00
700
$700.00
$1.25
600
$750.00
$1.50
500
$750.00
$1.75
400
$700.00
$2.00
300
$600.00
$2.25
200
$450.00
$2.50
100
$250.00
$2.75
$0.00
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