2. A duopoly example Aa Aa Suppose that there is a town in which only two of the
ID: 1107811 • Letter: 2
Question
2. A duopoly example Aa Aa Suppose that there is a town in which only two of the residents, Zach and Bette, own wells that produce water safe for drinking, and suppose that Zach and Bette 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 per Gallon Total Revenue Gallons Demanded (= Total Profit) ($) 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 50 100 150 200 250 300 350 400 450 500 550 600 275 500 675 800 875 900 875 800 675 500 275 Suppose Zach and Bette form a cartel and behave as a monopolist. Now, the profit-maximizing price is per gallon, and the total output is production equally. Therefore, Zach's profit is gallons. As part of their cartel agreement, Zach and Bette agree to split , and Bette's profit is Suppose that Zach and Bette 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, Zach says to himself, "Bette and I aren't the best of friends anyway. If I increase roduction to 50 gallons more than the cartel amount, I can increase mExplanation / Answer
Ans)
3
300
450
450
falls
2.50
2.50*200=500
2.50*150=375
Zachs profit=2*200=400
Bettes profit=2*00=400
Total profit=400+400=800
TRUE
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