the 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 Larry and Megan 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, Larry and Megan agree to split production equally. Therefore, Larry's profit is _____, and Megan's profit is_____. Suppose that Larry and Megan 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, Larry says to himself, "Megan and I aren't the best of friends anyway. If I increase my production to 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Larry implements his new plan, the price of water ______ (increases or decreases?) to_____ per gallon. Given Megan and Larry's production levels, Larry's profit becomes ______ and Megan's profit becomes _____. Because Larry has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Megan decides that she will also increase her production to 45 gallons more than the cartel amount. After Megan increases her production, Larry's profit becomes _____, Megan's profit becomes _____, and total profit (the sum of the profits of Larry and Megan) is now_______. True or False: Based on the fact that both Larry and Megan increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. 1. True 2. False Note that Larry and Megan started by behaving cooperatively. However, once Larry decided to cheat, Megan decided to cheat as well. In other words, Megan's output decisions are based on Larry's actions. This behavior is an example of_____?
the 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 Larry and Megan 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, Larry and Megan agree to split production equally. Therefore, Larry's profit is _____, and Megan's profit is_____. Suppose that Larry and Megan 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, Larry says to himself, "Megan and I aren't the best of friends anyway. If I increase my production to 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Larry implements his new plan, the price of water ______ (increases or decreases?) to_____ per gallon. Given Megan and Larry's production levels, Larry's profit becomes ______ and Megan's profit becomes _____. Because Larry has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Megan decides that she will also increase her production to 45 gallons more than the cartel amount. After Megan increases her production, Larry's profit becomes _____, Megan's profit becomes _____, and total profit (the sum of the profits of Larry and Megan) is now_______. True or False: Based on the fact that both Larry and Megan increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. 1. True 2. False Note that Larry and Megan started by behaving cooperatively. However, once Larry decided to cheat, Megan decided to cheat as well. In other words, Megan's output decisions are based on Larry's actions. This behavior is an example of_____?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
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Consider a town in which only two residents, Larry and Megan, own wells that produce water safe for drinking. Larry and Megan can pump and sell as much water as they want at no cost. For them, the total revenue equals profit. The following table shows the town's demand schedule for water.
|
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 Larry and Megan 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, Larry and Megan agree to split production equally. Therefore, Larry's profit is _____, and Megan's profit is_____.
Suppose that Larry and Megan 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, Larry says to himself, "Megan and I aren't the best of friends anyway. If I increase my production to 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."
After Larry implements his new plan, the price of water ______ (increases or decreases?) to_____ per gallon. Given Megan and Larry's production levels, Larry's profit becomes ______ and Megan's profit becomes _____.
Because Larry has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Megan decides that she will also increase her production to 45 gallons more than the cartel amount.
After Megan increases her production, Larry's profit becomes _____, Megan's profit becomes _____, and total profit (the sum of the profits of Larry and Megan) is now_______.
True or False: Based on the fact that both Larry and Megan increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity.
1. True
2. False
Note that Larry and Megan started by behaving cooperatively. However, once Larry decided to cheat, Megan decided to cheat as well. In other words, Megan's output decisions are based on Larry's actions.
This behavior is an example of_____?
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