### Understanding the Town's Water Demand ScheduleConsider a town in which only two residents, Van and Amy, own wells that produce drinking water. Van and Amy can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The table below illustrates the town’s demand schedule for water.#### Demand Schedule for Water| Price (Dollars per gallon) | Quantity Demanded (Gallons of water) | Total Revenue (Dollars) ||----------------------------|-------------------------------------|--------------------------|| 3.60 | 0 | 0 || 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 || 0.00 | 420 | 0 |#### Explanation of the Table- **Price (Dollars per gallon)**: This column shows the different prices at which water could be sold per gallon.- **Quantity Demanded (Gallons of water)**: This column indicates the corresponding quantity of water that the town's residents are willing to purchase at each price point.- **Total Revenue (Dollars)**: This is calculated by multiplying the price per gallon by the quantity demanded. It represents the total earnings from the sale of water at each price level.**Key Observations**:- At higher prices, such as $3.60 per gallon, the quantity demanded drops to zero, reflecting no willingness to purchase.- As the price decreases, the quantity demanded increases, peaking at 420 gallons when the price is zero.- Total revenue is highest at a price of $1.80 per gallon, ### Cartel Behavior and Market Dynamics**Scenario:**Van and Amy form a cartel and behave as monopolists. They agree to split production equally at a profit-maximizing price of **$1.80** per gallon, with a total output of **210** gallons. As part of this agreement, both Van's and Amy's profit is **$189.00**.**Plan Deviation:**- Van decides to increase his production to 35 gallons more than the cartel amount.- This causes the price of water to **decrease** to **$1.50** per gallon.- Van's profit becomes **$105**, and Amy's profit becomes **$105**.**Amy's Response:**- Amy reacts by also increasing her production by 35 gallons more than the cartel amount.- As a result, Van's new profit is **$121.50**, Amy's new profit is **$121.50**, and the total profit is now **$243.00**.**True or False Statement:**- Based on both Van and Amy increasing production from the initial cartel quantity, the statement reads that the output effect was smaller than the price effect at that quantity. - **Answer:** True**Behavior Analysis:**- Initially, Van and Amy were cooperative, but Van's decision to cheat led to Amy cheating as well.- This behavior exemplifies a situation of **competitive cheating or betrayal in a cartel agreement**.

Consider a town in which only two residents, Van and Amy, own wells that produce water safe for drinking. Van and Amy 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 (Dollars per gallon) 3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 Quantity Demanded (Gallons of water) 0 35 70 105 140 175 210 245 280 315 350 DOE Total Revenue (Dollars) 0 $115.50 $210.00 $283.50 $336.00 $367.50 $378.00 $367.50 $336.00 $283.50 $210.00 2115 FA

Consider a town in which only two residents, Van and Amy, own wells that produce water safe for drinking. Van and Amy 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 (Dollars per gallon) 3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 Quantity Demanded (Gallons of water) 0 35 70 105 140 175 210 245 280 315 350 DOE Total Revenue (Dollars) 0 $115.50 $210.00 $283.50 $336.00 $367.50 $378.00 $367.50 $336.00 $283.50 $210.00 2115 FA

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 there is only one supplier of water in this market, what will be its price and quantity for water? (MAKE THE SOLUTIONS READABLE!!!) 2. If there are two suppliers of water in the market (Victor and Sam) and they are able to collude and successfully form a cartel and agree to divide the market evenly, what would be the price of water and what quantity of water will each firm sell? How much profit will each seller earn (show solution)? 3. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist.…
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Consider a town in which only two residents, Hubert and Kate, own wells that produce water safe for drinking. Hubert and Kate 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) 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 Hubert and Kate 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, Hubert and Kate agree to split production equally. Therefore, Hubert's profit is _____, and Kate's profit is______. Suppose that Hubert and Kate have been successfully…
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