Assume Waterland and Aquataste make a nonbinding, informal agreement that each will produce 250 gallons of water, charge $1.50 per gallon, and evenly split the profit of $750.If Aquataste reneges on the agreement and produces 350 gallons, Waterland has an incentive to renege on the agreement by producing 350 gallons because Waterland’s profits would increase to $_____ , which is better than the $312.50 Waterland would earn by sticking with the agreement. (Provide your answer to two decimal places.) The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sellwater in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constantand equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, totalrevenue is equal to total profit.Price (per gallon)Quantity (gallons)Total Revenue (TR)$0.251000$250.00$0.50900$450.00$0.75800$600.00$1.00700$700.00$1.25600$750.00$1.50500$750.00$1.75400$700.00$2.00300$600.00$2.25200$450.00$2.50100$250.00$2.75$0.00

If both Aqua taste and water land produce 350 gallons, then the total production would be 700…

Answered: The following table shows your…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 9CQ

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Assume Waterland and Aquataste make a nonbinding, informal agreement that each will produce 250 gallons of water, charge $1.50 per gallon, and evenly split the profit of $750.

If Aquataste reneges on the agreement and produces 350 gallons, Waterland has an incentive to renege on the agreement by producing 350 gallons because Waterland’s profits would increase to $_____ , which is better than the $312.50 Waterland would earn by sticking with the agreement. (Provide your answer to two decimal places.)

The following table shows your neighorhood's demand for drinking water. Assume that only two firms (Waterland and Aquataste) produce and sell
water in this market. Each firm offers the same quality, no fixed costs are incurred in the production of water, and each firm's marginal cost is constant
and equal to $0 because both companies can pump as much water as needed without cost. Because marginal cost is constant and equal to $0, total
revenue is equal to total profit.
Price (per gallon)
Quantity (gallons)
Total Revenue (TR)
$0.25
1000
$250.00
$0.50
900
$450.00
$0.75
800
$600.00
$1.00
700
$700.00
$1.25
600
$750.00
$1.50
500
$750.00
$1.75
400
$700.00
$2.00
300
$600.00
$2.25
200
$450.00
$2.50
100
$250.00
$2.75
$0.00

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