Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa can pump and sell as much water as they want at no cost. For them, 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa 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, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $
Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa can pump and sell as much water as they want at no cost. For them, 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) 3.60 3.30 35 $115.50 3.00 70 $210.00 2.70 105 $283.50 2.40 140 $336.00 2.10 175 $367.50 1.80 210 $378.00 1.50 245 $367.50 1.20 280 $336.00 0.90 315 $283.50 0.60 350 $210.00 0.30 385 $115.50 420 Suppose Sam and Teresa 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, Sam and Teresa agree to split production equally. Therefore, Sam's profit is $ and Teresa's profit is $
Chapter15: Oligopoly And Strategic Behavior
Section: Chapter Questions
Problem 17P
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