Isolated Island has two natural gas wells, one owned by Tom and the other owned by Jerry.

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Isolated Island has two natural gas wells, one owned by Tom and the other owned by Jerry. Each well has a valve that controls the flow of gas. The marginal cost of producing gas is zero. Table 1 gives the demand schedule for the gas.


TABLE 1 Price (dollars per unit) 12 11 10 9996 IS & M 210 8 7 5 4 3 Quantity demanded (units per day) 0 1 2 3


1. If Tom and Jerry form a cartel and maximize their joint profit, what will be the price of gas and the quantity produced?

2. If Tom and Jerry are forced to sell at the perfectly competitive price, what will be the price of gas and the total quantity produced?

3. If Tom and Jerry compete as duopolists, what will be the price of gas?

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Foundations Of Economics

ISBN: 9780134486819

8th Edition

Authors: Robin Bade, Michael Parkin

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