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Consider a town in which only two residents, James and Amber, own wells that produce water safe for drinking. James and Amber 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.

Consider a town in which only two residents, James and Amber, own wells that produce water safe for drinking. James and Amber 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.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: Monopolistic Competition
Section: Chapter Questions
Problem 3PA
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3. Breakdown of a cartel agreement Consider a town in which only two residents, James and Amber, own wells that produce water safe for drinking. James and Amber 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 (Dollars per gallon) 5.40 4.95 4.50 4.05 3.60 3.15 2.70 2.25 1.80 1.35 0.90 0.45 0 Quantity Demanded (Gallons of water) 45 90 135 180 225 270 315 360 405 450 495 540 Total Revenue (Dollars) 0 $222.75 $405.00 $546.75 $648.00 $708.75 $729.00 $708.75 $648.00 $546.75 $405.00 $222.75
Transcribed Image Text:3. Breakdown of a cartel agreement Consider a town in which only two residents, James and Amber, own wells that produce water safe for drinking. James and Amber 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 (Dollars per gallon) 5.40 4.95 4.50 4.05 3.60 3.15 2.70 2.25 1.80 1.35 0.90 0.45 0 Quantity Demanded (Gallons of water) 45 90 135 180 225 270 315 360 405 450 495 540 Total Revenue (Dollars) 0 $222.75 $405.00 $546.75 $648.00 $708.75 $729.00 $708.75 $648.00 $546.75 $405.00 $222.75
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