The information in the table below shows the demand schedule for water in a certain small town. Assume the marginal cost of supplying water is constant at $4 per bottle. Price Quantity (bottles) $9 200 $8 400 $7 600 $6 800 $5 1000 $4 1200 $3 1400 $2 1600 (Note: You may want to extend this table to generate additional data. If you do, you need not submit the extended table.) 1. Suppose there is only one supplier of water in this market, what will be its price and quantity for water? 2. If there are two suppliers of water in the market (Victor and Sam) and they are able to collude and successfully form a cartel and agree to divide the market evenly, what would be the price of water and what quantity of water will each firm sell? How much profit will each seller earn (show solution)? 3. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist. What will the new price be and what quantity of water will each of them produce once the Nash equilibrium is reached? How much is the total market quantity
The information in the table below shows the demand schedule for water in a certain small town. Assume the marginal cost of supplying water is constant at $4 per bottle.
|
|
Quantity (bottles) |
|
$9 |
200 |
|
$8 |
400 |
|
$7 |
600 |
|
$6 |
800 |
|
$5 |
1000 |
|
$4 |
1200 |
|
$3 |
1400 |
|
$2 |
1600 |
(Note: You may want to extend this table to generate additional data. If you do, you need not submit the extended table.)
1. Suppose there is only one supplier of water in this market, what will be its price and quantity for water?
2. If there are two suppliers of water in the market (Victor and Sam) and they are able to collude and successfully form a cartel and agree to divide the market evenly, what would be the price of water and what quantity of water will each firm sell? How much profit will each seller earn (show solution)?
3. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist. What will the new price be and what quantity of water will each of them produce once the Nash equilibrium is reached? How much is the total market quantity?
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