Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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.fill in every blank!!NOTE: options for first drop down question is (decreases or increases)options for second drop down question is (tying, a tit for tat strategy, a dominant strategy, a prisioners dilemma) 5.5045$247.505.0090$450.004.50135$607.504.00180$720.003.50225$787.503.00270$810.002.50315$787.502.00360$720.001.50405$607.501.00450$450.000.50495$247.50540Suppose Jacques and Kyoko form a cartel and behave as a monopolist. The profit-maximizing price is 5per litre, and the total outputislitres. As part of their cartel agreement, Jacques and Kyoko agree to split production equally. Therefore, Jacques's profit isand Kyoko's profit is SSuppose that Jacques and Kyoko have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopolyquantity. Then one night before going to sleep, Jacques says to himself, "Kyoko and I aren't the best of friends anyway. If I increase my production to45 litres more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."After Jacques implements his new plan, the price of waterto $per litre. Given Kyoko and Jacques's productionlevels, Jacques's profit becomesand Kyoko's profit becomes SBecause Jacques has deviated from the cartel agreement and increased his output of water to 45 litres more than the cartel amount, Kyoko decidesthat she will also increase her production to 45 litres more than the cartel amount.After Kyoko increases her production, Jacques's profit becomes ssum of the profits of Jacques and Kyoko) is now5Kyoko's profit becomes 5and total profit (theTrue or False: Based on the fact that both Jacques and Kyoko increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO FalseNote that Jacques and Kyoko started by behaving cooperatively. However, once Jacques decided to cheat, Kyoko decided to cheat as well. In otherwords, Kyoko's output decisions are based on Jacques's actions.This behaviour is an example of Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko can pump andsell 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.PriceQuantity DemandedTotal Revenue(Dollars per litre)(Litres of water)(Dollars)6.005.5045$247.505.0090$450.004.50135$607.504.00180$720.003.50225$787.503.00270$810.002.50315$787.502.00360$720.001.50405$607.501.00450$450.000.50495$247.50540Suppose Jacques and Kyoko form a cartel and behave as a monopolist. The profit-maximizing price is sper litre, and the total output|litres. As part of their cartel agreement, Jacques and Kyoko agree to split production equally. Therefore, Jacques's profit is|, and Kyoko's profit is sisSuppose that Jacques and Kyoko have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopolyquantity. Then one night before going to sleep, Jacques says to himself, "Kyoko and I aren't the best of friends anyway. If I increase my production to45 litres more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."After Jacques implements his new plan, the price of waterlevels, Jacques's profit becomes 5toper litre. Given Kyoko and Jacques's productionand Kyoko's profit becomes sBecause Jacques has deviated from the cartel agreement and increased his output of water to 45 litres more than the cartel amount, Kyoko decidesthat she will also increase her production to 45 litres more than the cartel amount.After Kyoko increases her production, Jacques's profit becomesKyoko's profit becomes sand total profit (thesum of the profits of Jacques and Kyoko) is now 5True or False: Based on the fact that both Jacques and Kyoko increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO False

Answered: Consider a town in which only two…

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 9E