The information in the table below shows the demand schedule for water in a certain small town. Assume the marginal cost of supplying water is constant at $4 per bottle. Price Quantity (bottles) $9 200 $8 400 $7 600 $6 800 $5 1000 $4 1200 $3 1400 $2 1600 (Note: You may want to extend this table to generate additional data. If you do, you need not submit the extended table.) 1. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist. What will the new price be and what quantity of water will each of them produce once the Nash equilibrium is reached? How much is the total market quantity? 2. Under the conditions given in Question #1 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium (show solution)? 3. If there were many sellers in this market, what would be the output and price?
The information in the table below shows the demand schedule for water in a certain small town. Assume the marginal cost of supplying water is constant at $4 per bottle.
|
|
Quantity (bottles) |
|
$9 |
200 |
|
$8 |
400 |
|
$7 |
600 |
|
$6 |
800 |
|
$5 |
1000 |
|
$4 |
1200 |
|
$3 |
1400 |
|
$2 |
1600 |
(Note: You may want to extend this table to generate additional data. If you do, you need not submit the extended table.)
1. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist. What will the new price be and what quantity of water will each of them produce once the Nash equilibrium is reached? How much is the total market quantity?
2. Under the conditions given in Question #1 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium (show solution)?
3. If there were many sellers in this market, what would be the output and price?
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