2.-In the first table below, you will find the (marginal) willingness to pay for purified water by the only three consumers in this market. In the second table, you will find the marginal cost of (additional) units of output for the only two producers of purified water in this market. a) You have obtained the competitive equilibrium in this market. (You can do it again.) Now suppose that the purified water comes in plastic containers that the city needs to recycle, at a cost of $ .2 per container. Is the competitive output efficient, too high, or too low? If it is not efficient, propose (and quantify) a measure the city can take to lead the market to an efficient outcome. b) Now ignore the city and suppose instead that the two firms "merge". That is, they form a monopoly (with two plants), and so the (marginal) cost for this monopoly is simply the horizontal sum of the two columns. That is, you combine the two cost columns, from lowest to highest. (MC(1)=.1, MC(2)=.3, MC(3)=.3, MC(4)=.4, etc.) Compute the optimal price for the monopolist. I will do part of the work for you: it is either 1, 1.1, 1.2, or 1.3. c) Given what you know about the cost of recycling, is the monopolistic outcome more or less inefficient than the competitive outcome (with no market intervention)? GALLONS FIRM 1 FIRM 2 GALLONS ANNE BOB CARLISLE $.3 $.1 $1.5 $1.1 $1.8 $.4 $.3 W N $1.2 $.9 $1.3 $.5 $.4 $.8 $1.1 $.6 A W N $1 $.6 a uit $.5 $.6 $.9 $.8 $.7 $.4 $.5 $.7 $.9 $.9 6 $1.0 $1.0 $.2 $.4 $.5