help with this quesiton for microeco 2. Breakdown of a cartel agreement Suppose
ID: 1225805 • Letter: H
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help with this quesiton for microeco
2. Breakdown of a cartel agreement Suppose that there is a town in which only two of the residents, Ralph and Erin, own wells that produce water safe for drinking, and suppose that Ralph and Erin can pump and sell as much water as they want at no cost. For them, total revenue equals economic profit. The following table shows the town's demand schedule for water Price per Gallon Total Revenue Gallons Demanded (= Total Profit) ($) 12 300 600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000 3,300 3,600 3,300 6,000 8,100 9,600 10,500 10,800 10,500 9,600 8,100 6,000 3,300 10 8 6 Suppose Ralph and Erin form a cartel and behave as a monopolist. Now, the profit-maximizing price is gallon, and the total output is production equally. Therefore, Ralph's economic profit is per gallons. As part of their cartel agreement, Ralph and Erin agree to split , and Erin's economic profit isExplanation / Answer
Answer to blank 1: $6 (because TR is maximum)
Answer to blank 2: 1800 gallons
Answer to blank 3: $5400 (i.e. 10800 / 2)
Answer to blank 4: $5400 (i.e. 10800 / 2)
Answer to blank 5: Decreases
Answer to blank 6: $5
Answer to blank 7: $6000 (i.e. $5*1200)
Answer to blank 8: $4500 (i.e. $5*900)
Answer to blank 9: $4800 (i.e. $4*1200)
Answer to blank 10: $4800 (i.e. $4*1200)
Answer to blank 11: $9600 (i.e. 4800 * 2)
True
Answer to blank 12: Nash equilibrium
Explanation: A Nash equilibrium is a situation in which each economic entity chooses the best strategy to maximize his or herpayoff, given the actions of other entities. Each party sees no gain from changing his or her strategy if the actions ofthe other parties remain fixed.
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