Fill in the blank choices. Consider a town in which only two residents, Antonio

Question

Fill in the blank choices.

Consider a town in which only two residents, Antonio and Caroline, own wells that produce water safe for drinking. Antonio and Caroline 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 Quantity Demanded Total Revenue Dollars per gallon) (Gallons of water) 3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 0 0 35 70 105 140 175 210 245 280 315 350 385 420 Dollars) 0 115.50 210.00 283.50 336.00 367.50 378.00 367.50 336.00 283.50 210.00 115.50 0

Explanation / Answer

Answer to blank 1: Decreases

Answer to blank 2: $1.50 (Now Total output is 105 + 140 = 245. So, in the table, the price against 245 level of output is $1.50)

Answer to blank 3: $210 (i.e. 140 * 1.50)

Answer to blank 4: $157.50 (i.e. 105 * 1.50)

Answer to blank 5: $168 (i.e. 140 * 1.20)      (Now the total output is 140 + 140 = 280. So, in the table, the price against 280 level of output is $1.20)

Answer to blank 6: $168 (i.e. 140 * 1.20)

Answer to blank 7: $336 (i.e. 168 +168)

True

Explanation: Producers choose to increase output when the outputeffect is greater than the price effect, and to reduce output when the price effect is greater than the output effect.Given that the producers deviated from the cartel quantity, the output effect must have been larger.

Answer to blank 8: A prisoner's dilemma

Explanation: The prisoner's dilemma is a situation in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome.

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