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After Lorenzo implements his new plan, the price of water decreases to $2.50 per gallon. Given Neha and Lorenzo's production levels, Lorenzo's prot becomes $450.00

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After Lorenzo implements his new plan, the price of water decreases to $2.50 per gallon. Given Neha and Lorenzo's production levels, Lorenzo's prot becomes $450.00 and Neha's prot becomes $337.50. Because Lorenzo has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Neha decides that she will also increase her production to 45 gallons more than the cartel amount. After Neha increases her production, Lorenzo's prot becomes $360.00, Neha's prot becomes $360.00, and total prot (the sum of the prots of Lorenzo and Neha) is now $720.00. True or False: Based on the fact that both Lorenzo and Neha increased production from the initial cartel quantity, you know that the output effect was smaller than the price effect at that quantity. True c! False

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