Please answer all parts, dont really mind the work just the answers try to answe

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Please answer all parts, dont really mind the work just the answers

try to answer correctly please

3. Breakdown of a cartel agreement Consider a town in which only two residents, Clancy and Eileen, own wells that produce water safe for drinking. Clancy and Eileen 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) 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 45 90 135 180 225 270 315 360 405 450 495 540 $247.50 $450.00 $607.50 $720.00 $787.50 $810.00 $787.50 $720.00 $607.50 $450.00 $247.50 Suppose Clancy and Eileen 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, Clancy and Eileen agree to split production equally. Therefore, Clancy's profit is , and Eileen's profit is $ Suppose that Clancy and Eileen 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, Clancy says to himself, "Eileen 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."

Explanation / Answer

a cartel means that they maximize the profits by looking at the entire demand schedule. It is easy to see that profits are maximized at a price of $3.00. At that price, output is 270 (and total profits are $810). Since they split production equally, divide these numbers by 2. Each will have a profit of $405.

When Clancy, by herself, increases production by 45, and before Eileen changes her production, total production will increase by 45 from the previous level of 270. That would be a total production of 315, and at that level, the market price would be $2.50. So the market price decreases. At a price of $2.50, with Clancy increasing her share of production from 135 to 180, she would earn a profit of $450. Eileen's profit would be the new price of $2.50 times her (unchanged) output of 135, or $337.5. The total profit is the sum of $450 and $337.5, or $787.5. This matches the total profit in the table for a price of $2.50.

Now, when Eileen responds and also raises her output. This means that total output will increase by another 45, to 360, with each having the same output of 180. At an output level of 360, the market price lowers to $2.00, and with each having an output of 180, the profit for each will be $360.

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