Hi, could you solve this step by step and show where the numbers come from. 4. In France, the market for bottled water is controlled by two large firms,Perrier and Evian. Each firm has a fixed cost of €1 million and aconstant marginal cost of €2 per liter of bottled water (€1 = 1 euro).The following table gives the market demand schedule for bottledwater in France.Price of bottled water (per liter)€109876LO54321Quantity of bottled water demanded(millions of liters)0123456789 a. Suppose the two firms form a cartel and act as a monopolist.Calculate marginal revenue for the cartel. What will the monopolyprice and output be? Assuming the firms divide the output evenly,how much will each produce and what will each firm's profit be?b. Now suppose Perrier decides to increase production by 1 millionliters. Evian doesn't change its production. What will the newmarket price and output be? What is Perrier's profit? What is Evian'sprofit?c. What if Perrier increases production by 3 million liters? Eviandoesn't change its production. What would Perrier's output andprofit be relative to those in part b?d. What do your results tell you about the likelihood of cheating onsuch agreements?

Note: There are multiple sub parts in the question. Hence, we shall solve the first three for you at…

4. In France, the market for bottled water is controlled by two large firms, Perrier and Evian. Each firm has a fixed cost of €1 million and a constant marginal cost of €2 per liter of bottled water (€1 = 1 euro). The following table gives the market demand schedule for bottled water in France. Price of bottled water (per liter) €10 9 8 7 6 5 4 3 2 1 Quantity of bottled water demanded (millions of liters) 0 1 2 3 4 LO 5 6 7 8 9

4. In France, the market for bottled water is controlled by two large firms, Perrier and Evian. Each firm has a fixed cost of €1 million and a constant marginal cost of €2 per liter of bottled water (€1 = 1 euro). The following table gives the market demand schedule for bottled water in France. Price of bottled water (per liter) €10 9 8 7 6 5 4 3 2 1 Quantity of bottled water demanded (millions of liters) 0 1 2 3 4 LO 5 6 7 8 9

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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