Suppose Amrit and Aldeen form a cartel and behave as a monopolist. The protmaximizing price is 3 per gallon and the total output , 7 I is gallons. As part of their cartel agreement, Amrit and Aideen agree to split production equally. Therefore, Amrit's prot is s _ i I and Aideen's profit is s Suppose that Amrit and Aldeen 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, Amrit says to himself, "Aldeen and I aren't the best of friends anyway. If I increase my production to 45 gallons more than the cartel amount, I can increase my prot even though her prot goes down. I will do that starting tomorrow." per gallon. Given Aldeen and Amrlt's production levels, After Amrit implements his new plan, the price of water V to :3 Amrit's prot becomes 8 and Aideen's prot becomes s ' Because Amrit has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Aldeen decides that she will also increase her production to 45 gallons more than the cartel amount. , Aideen's prot becomes 9 , and total prot (the sum After Aldeen increases her production, Amrit's prot becomes 3 of the prots of Amrit and Aldeen) is now 5 e lnldal cartel quantity, you know that the output effect was True or False: Based on the fact that both Amrit and Aldeen Increased production from th larger than the price effect at that quantity. True False l amount. However, they ased production by 45 gallons more than the carte ach cheated on their cartel agreement and Incre this for yourself, consider Amrit and Aldeen have e continue to increase output beyond this amount, unt compare they'll each suffer a decrease In prot. (To see 45 gallons more than the cartel both realize that if they cl to his prot when he produces Amrlt's prot when he produces 90 gallons more than the cartel amo amount.) . i outcome is an Neither Amrit nor Aldeen has an incentive to increase output further, nor does either have an incentive to decrease output Th 5 Suppose that Amrit and Aideen 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, Amrit says to himself, "Aideen and I aren't the best of friends anyway. If I increase my production to 45 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Amrit implements his new plan, the price of water to $ per gallon. Given Aideen and Amrit's production levels, Amrit's profit becomes $ and Aideen's profit becomes $ Because Amrit has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Aldeen decides that she will also increase her production to 45 gallons more than the cartel amount. After Aldeen increases her production, Amrit's profit becomes $ , Aideen's profit becomes $ and total profit (the sum of the profits of Amrit and Aldeen) is now $ True or False: Based on the fact that both Amrit and Aldeen increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. O True False Amrit and Aldeen have each cheated on their cartel agreement and increased production by 45 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 profit. (To see this for yourself, consider Amrit's profit when he produces 90 gallons more than the cartel amount compared to his profit when he produces 45 gallons more than the cartel amount.) Neither Amrit nor Aldeen has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome Is an example ofConsider a town in which only two residents, Amrit and Aldeen, own wells that produce water safe for drinking. Amrit and Aldeen 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 45 $222.75 4.50 90 $405.00 4.05 135 $546.75 3.60 180 $648.00 3.15 225 $708.75 2.70 270 $729.00 2.25 315 $708.75 1.80 360 $648.00 1.35 405 $546.75 0.90 450 $405.00 0.45 495 $222.75 0 540 0 Suppose Amrit and Aldeen 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, Amrit and Aldeen agree to split production equally. Therefore, Amrit's profit is $ and Aideen's profit is $ Suppose that Amrit and Aideen 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, Amrit says to himself, "Aldeen and I aren't the best of friends anyway. If I Increase my production to ore than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow,"