please answer the questions
Consider a town in which only two residents, Brian and Crystal, own wells that produce water safe for drinking. Brian and Crystal 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) 5.40 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Brian and Crystal form a cartel and behave as a monopolist. The prot-maximizing price is $ per gallon, and the total output is gallons. As part of their cartel agreement, Brian and Crystal agree to split production equally. Therefore, Brian's profit is Suppose that Brian and Crystal have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Brian says to himself, "Crystal and I aren't the best of friends anyway. IfI increase my production to 40 gallons more than the cartel amount, I can increase my profit even though her prot goes down. I will do that starting tomorrow." After Brian implements his new plan, the price of water 7 to $ per gallon. Given Crystal and Brian's production levels, Brian's prot becomes $ and Crystal's profit becomes $ . Because Brian has deviated from the cartel agreement and increased his output of water to 40 gallons more than the cartel amount, Crystal decides that she will also increase her production to 40 gallons more than the cartel amount. After Crystal increases her production, Brian's prot becomes $ , Crystal's profit becomes $ , and total prot (the sum of the prots of Brian and Crystal) is now . True or False: Based on the fact that both Brian and Crystal increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. 0 True 0 False Brian and Crystal have each cheated on their cartel agreement and increased production by 40 gallons more than the cartel amount. However, they both realize that if they continue to increase output beyond this amount, they'll each suffer a decrease in prot. (To see this for yourself, consider Brian's prot when he produces 80 gallons more than the cartel amount compared to his profit when he produces 40 gallons more than the cartel amount.) Neither Brian nor Crystal has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is an example of v . Brian and @ resale price maintenance their cartel agreement and increased production by 40 gallons more than the cartel amount. However, they both realize ease output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider Brian's prof predatory pricing ons more than the cartel amount compared to his profit when he produces 40 gallons more than the cartel amount.) tying a Nash equilibrium Neither Bria ve to increase output further, nor does either have an incentive to decrease output. This outcome is an example of
