1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC = 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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1. Consider a market for water with two firms. We assume two firms can produce the good
without any cost (TC= 0). The market demand schedule is given as:
Quantity (gallon)
Price ($)
30
90
40
80
50
70
60
60
70
50
80
40
90
30
100
20
110
10
Cartel:
Assume that two firms are colluding, so both firms agree upon a contract that they produce the
same amount of output.
a. How much would each firm produce if they form the cartel? Why?
Transcribed Image Text:1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC= 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. a. How much would each firm produce if they form the cartel? Why?
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