This question was rejected because it was not clear so I took two screenshots of the same homework question. Thank you for your help! Because Nick has deviated from the cartel agreement and increased his output of water to 25 gallons more than the cartel amount, Rosa decides thatshe will also increase her production to 25 gallons more than the cartel amount.After Rosa increases her production, Nick's profit becomes $Rosa's profit becomes $and total profit (the sum ofthe profits of Nick and Rosa) is nowTrue or False: Based on the fact that both Nick and Rosa increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO FalseNick and Rosa have each cheated on their cartel agreement and increased production by 25 gallons more than the cartel amount. However, they bothrealize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider Nick'sprofit when he produces 50 gallons more than the cartel amount compared to his profit when he produces 25 gallons more than the cartel amount.)Neither Nick nor Rosa has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is an example of 3. Breakdown of a cartel agreementConsider a town in which only two residents, Nick and Rosa, own wells that produce water safe for drinking. Nick and Rosa can pump and sell as muchwater 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 gallon)(Gallons of water)(Dollars)5.404.9525$123.754.5050$225.004.0575$303.753.60100$360.003.15125$393.752.70150$405.002.25175$393.751.80200$360.001.35225$303.750.90250$225.000.45275$123.75300Suppose Nick and Rosa form a cartel and behave as a monopolist. The profit-maximizing price is $per gallon, and the total output isgallons. As part of their cartel agreement, Nick and Rosa agree to split production equally. Therefore, Nick's profit is $andRosa's profit is $Suppose that Nick and Rosa 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, Nick says to himself, "Rosa and I aren't the best of friends anyway. If I increase my production to 25 gallonsmore than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."After Nick implements his new plan, the price of watertoper gallon. Given Rosa and Nick's production levels,Nick's profit becomesand Rosa's profit becomesBecause Nick has deviated from the cartel agreement and increased his output of water to 25 gallons more than the cartel amount, Rosa decides thatshe will also increase her production to 25 gallons more than the cartel amount.After Rosa increases her production, Nick's profit becomes $Rosa's profit becomes $and total profit (the sum ofthe profits of Nick and Rosa) is now $

Question

This question was rejected because it was not clear so I took two screenshots of the same homework question. Thank you for your help! Because Nick has deviated from the cartel agreement and increased his output of water to 25 gallons more than the cartel amount, Rosa decides thatshe will also increase her production to 25 gallons more than the cartel amount.After Rosa increases her production, Nick's profit becomes $Rosa's profit becomes $and total profit (the sum ofthe profits of Nick and Rosa) is nowTrue or False: Based on the fact that both Nick and Rosa increased production from the initial cartel quantity, you know that the output effect waslarger than the price effect at that quantity.O TrueO FalseNick and Rosa have each cheated on their cartel agreement and increased production by 25 gallons more than the cartel amount. However, they bothrealize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider Nick'sprofit when he produces 50 gallons more than the cartel amount compared to his profit when he produces 25 gallons more than the cartel amount.)Neither Nick nor Rosa has an incentive to increase output further, nor does either have an incentive to decrease output. This outcome is an example of 3. Breakdown of a cartel agreementConsider a town in which only two residents, Nick and Rosa, own wells that produce water safe for drinking. Nick and Rosa can pump and sell as muchwater 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 gallon)(Gallons of water)(Dollars)5.404.9525$123.754.5050$225.004.0575$303.753.60100$360.003.15125$393.752.70150$405.002.25175$393.751.80200$360.001.35225$303.750.90250$225.000.45275$123.75300Suppose Nick and Rosa form a cartel and behave as a monopolist. The profit-maximizing price is $per gallon, and the total output isgallons. As part of their cartel agreement, Nick and Rosa agree to split production equally. Therefore, Nick's profit is $andRosa's profit is $Suppose that Nick and Rosa 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, Nick says to himself, &#34;Rosa and I aren't the best of friends anyway. If I increase my production to 25 gallonsmore than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow.&#34;After Nick implements his new plan, the price of watertoper gallon. Given Rosa and Nick's production levels,Nick's profit becomesand Rosa's profit becomesBecause Nick has deviated from the cartel agreement and increased his output of water to 25 gallons more than the cartel amount, Rosa decides thatshe will also increase her production to 25 gallons more than the cartel amount.After Rosa increases her production, Nick's profit becomes $Rosa's profit becomes $and total profit (the sum ofthe profits of Nick and Rosa) is now $

Accepted Answer

The monopolist operates in the monopoly market where a single seller of the goods sells the goods in…