Topic: Discussion X Homework: Mon( X MindTap - Cenga X Course Hero X Q Based on the dat X Course Hero X + X C https:/g.cengage.com/staticb/ui/evo/index.html?deploymentld=5813538219621591114194498&eISBN=978133.. A . . . > > CENGAGE | MINDTAP Q Search this course ? Homework: Monopolistic Competition, Oligopoly, and Game Theory (Ch 24) X 7. Breakdown of a cartel agreement Consider a town in which only two residents, Eric and Ginny, own wells that produce water safe for drinking. Eric and Ginny 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. E A-Z Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 6.00 0 0 EI 5.50 45 $247.50 5.00 90 $450.00 + 4.50 135 $607.50 4.00 180 $720.00 bongo 3.50 225 $787.50 3.00 270 $810.00 2.50 315 $787.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 ? 0.50 495 $247.50 A+ 0 540 0 C+ O Suppose Eric and Ginny form a cartel and behave as a monopolist. The profit-maximizing price is |$ per gallon, and the total output is gallons. As part of their cartel agreement, Eric and Ginny agree to split production equally. Therefore, Eric's profit is | $ , and Ginnv's profit ic $ 1 57OF Cloudy Q Search W 1:53 PM 4/11/2024 PRETopic: Discussion X Homework: Mon( X MindTap - Cenga X Course Hero X Q Based on the dat X Course Hero X + X C https:/g.cengage.com/staticb/ui/evo/index.html?deploymentld=5813538219621591114194498&elSBN=978133.. A" . . . CENGAGE | MINDTAP Q Search this course ? Homework: Monopolistic Competition, Oligopoly, and Game Theory (Ch 24) X 2. 50 315 $/81.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 A-Z E 0.50 495 $247.50 0 540 0 o EI Suppose Eric and Ginny form a cartel and behave as a monopolist. The profit-maximizing price is |$ per gallon, and the total output is gallons. As part of their cartel agreement, Eric and Ginny agree to split production equally. Therefore, Eric's profit is |$ ,and + 1 2 Ginny's profit is |$ bongo Suppose that Eric and Ginny 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, Eric says to himself, "Ginny 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 Eric implements his new plan, the price of water to $ per gallon. Given Ginny and Eric's production levels, Eric's profit becomes |$ and Ginny's profit becomes $ (? A+ Because Eric has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Ginny decides that she will also increase her production to 45 gallons more than the cartel amount. After Ginny increases her production, Eric's profit becomes |$ Ginny's profit becomes |$ and total profit (the sum of O the profits of Eric and Ginny) is now |$ Grade It Now Save & Continue 1 57OF W 1:53 PM Cloudy Q Search 4/11/2024 PRETopic: Discussion X Homework: Mon( X MindTap - Cenga X Course Hero X Q Based on the dat X Course Hero X + X C https:/g.cengage.com/staticb/ui/evo/index.html?deploymentld=5813538219621591114194498&elSBN=978133.. A" . . . CENGAGE | MINDTAP Q Search this course ? Homework: Monopolistic Competition, Oligopoly, and Game Theory (Ch 24) X 2. 50 315 $/81.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 A-Z E 0.50 495 $247.50 0 540 0 o EI Suppose Eric and Ginny form a cartel and behave as a monopolist. The profit-maximizing price is |$ per gallon, and the total output is gallons. As part of their cartel agreement, Eric and Ginny agree to split production equally. Therefore, Eric's profit is |$ ,and + 1 2 Ginny's profit is |$ bongo Suppose that Eric and Ginny 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, Eric says to himself, "Ginny 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 Eric implements his new plan, the price of water to $ per gallon. Given Ginny and Eric's production levels, Eric's profit becomes |$ and Ginny's profit decreases (? A+ Because Eric has deviated from the cartel agreement & increases his output of water to 45 gallons more than the cartel amount, Ginny decides that she will also increase her production to 45 gallons more than the cartel amount. After Ginny increases her production, Eric's profit becomes |$ Ginny's profit becomes |$ and total profit (the sum of O the profits of Eric and Ginny) is now |$ Grade It Now Save & Continue 1 57OF W 1:53 PM Cloudy Q Search 4/11/2024 PRE