Quantity
(in gallons)
Price
Total Revenue
(and total profit)
0
$10
$0
50
9
450
100
8
800
150
7
1,050
200
6
1,200
250
5
1,250
300
4
1,200
350
3
1,050
400
2
800
450
1
450
500
0
0
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.
25. If the market for gasoline in Mauston is perfectly competitive, then the equilibrium price of gasoline is
a. $7 and the equilibrium quantity is 150 gallons.
b. $5 and the equilibrium quantity is 250 gallons.
c. $3 and the equilibrium quantity is 350 gallons.
d. $0 and the equilibrium quantity is 500 gallons.
26. If the market for gasoline in Mauston is a monopoly, then the profit-maximizing monopolist will charge a price of
a. $7 and sell 150 gallons.
b. $5 and sell 250 gallons.
c. $3 and sell 350 gallons.
d. $0 and sell 500 gallons.
27. Refer to Table 17-4. If there are exactly two sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?
a. Each seller will sell 250 gallons and charge a price of $5.
b. Each seller will sell 175 gallons and charge a price of $3.
c. Each seller will sell 125 gallons and charge a price of $2.5.
d. Each seller will sell 125 gallons and charge a price of $5.
28. If there are exactly four sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?
a. Each seller will sell 62.5 gallons and charge a price of $1.25.
b. Each seller will sell 62.5 gallons and charge a price of $5.
c. Each seller will sell 100 gallons and charge a price of $2.
d. Each seller will sell 250 gallons and charge a price of $0.
29. Refer to Table 17-4. Suppose there are exactly two sellers of gasoline in Mauston: Shellon and Standstop. If Shellon sells 150 gallons and Standstop sells 200 gallons, then
a. Shellon's profit is $450 and Standstop's profit is $600.
b. Shellon's profit is $1,050 and Standstop's profit is $1,200.
c. the two firms are colluding and earn monopoly profits.
d. consumers in Mauston are worse off than they would be if the two firms colluded.
Quantity
(in gallons)
|
Price |
Total Revenue |
|
|
0 |
$10 |
$0 |
|
50 |
9 |
450 |
|
100 |
8 |
800 |
|
150 |
7 |
1,050 |
|
200 |
6 |
1,200 |
|
250 |
5 |
1,250 |
|
300 |
4 |
1,200 |
|
350 |
3 |
1,050 |
|
400 |
2 |
800 |
|
450 |
1 |
450 |
|
500 |
0 |
0 |
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.
25. If the market for gasoline in Mauston is perfectly competitive, then the equilibrium price of gasoline is
a. $7 and the equilibrium quantity is 150 gallons.
b. $5 and the equilibrium quantity is 250 gallons.
c. $3 and the equilibrium quantity is 350 gallons.
d. $0 and the equilibrium quantity is 500 gallons.
26. If the market for gasoline in Mauston is a monopoly, then the profit-maximizing monopolist will charge a price of
a. $7 and sell 150 gallons.
b. $5 and sell 250 gallons.
c. $3 and sell 350 gallons.
d. $0 and sell 500 gallons.
27. Refer to Table 17-4. If there are exactly two sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?
a. Each seller will sell 250 gallons and charge a price of $5.
b. Each seller will sell 175 gallons and charge a price of $3.
c. Each seller will sell 125 gallons and charge a price of $2.5.
d. Each seller will sell 125 gallons and charge a price of $5.
28. If there are exactly four sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?
a. Each seller will sell 62.5 gallons and charge a price of $1.25.
b. Each seller will sell 62.5 gallons and charge a price of $5.
c. Each seller will sell 100 gallons and charge a price of $2.
d. Each seller will sell 250 gallons and charge a price of $0.
29. Refer to Table 17-4. Suppose there are exactly two sellers of gasoline in Mauston: Shellon and Standstop. If Shellon sells 150 gallons and Standstop sells 200 gallons, then
a. Shellon's profit is $450 and Standstop's profit is $600.
b. Shellon's profit is $1,050 and Standstop's profit is $1,200.
c. the two firms are colluding and earn monopoly profits.
d. consumers in Mauston are worse off than they would be if the two firms colluded.
Related textbook solutions
Related questions
Task 2: Interpreting Graphs
The student will identify and explain specific effects of price controls at given prices.
Using the hypothetical information in the table on the market for gasoline, complete the following questions:
|
Price of Gasoline (per gallon) |
Quantity Demanded (millions of gallons per week) |
Quantity Supplied (millions of gallons per week) |
|---|---|---|
|
$0.50 |
85 |
0 |
|
$1.00 |
75 |
15 |
|
$1.50 |
65 |
20 |
|
$2.00 |
55 |
25 |
|
$2.50 |
45 |
30 |
|
$3.00 |
35 |
35 |
|
$3.50 |
25 |
45 |
|
$4.00 |
15 |
55 |
Graph the demand and supply for gasoline using the myeconlab grapher software http://www.mathxl.com/info/grapher.aspx. Please start your graph at the origin and label each axis and each curve.
Screenshot instructions: To paste the graphed image on a Word document, press and hold âALT,â then press âPrtScrnâ while viewing the graphed image. Select a point on the Word document to paste the graph. Press and hold âCrtl,â then press âV.â
(Note: Change the numbers on each axis. Label each axis and each curve. Start your graph from the origin.)
Fill in the blanks highlighted in yellow.
B. The equilibrium price of gasoline is _________ and the equilibrium quantity is _____________.
C. The government imposes a price ceiling of $2.50 in this market. The prevailing price in this market is now _________. The quantity demanded is now _____________ and the quantity supplied is _____________.
D. The price ceiling results in a (SURPLUS OR SHORTAGE) _______________________ in the amount of _______________________.
Submission Requirements:
Attach a separate Word document for each task; all answers should be included in this document.
Myeconlab grapher software must be used for the graphed image.
A screen shot of the graphed image must be pasted to the Word document. Directions are listed within the assessment.
3. Breakdown of a cartel agreement
Consider a town in which only two residents, Gilberto and Juanita, own wells that produce water safe for drinking. Gilberto and Juanita 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) |
(Dollars) |
|
5.40 |
0 |
0 |
|
4.95 |
25 |
$123.75 |
|
4.50 |
50 |
$225.00 |
|
4.05 |
75 |
$303.75 |
|
3.60 |
100 |
$360.00 |
|
3.15 |
125 |
$393.75 |
|
2.70 |
150 |
$405.00 |
|
2.25 |
175 |
$393.75 |
|
1.80 |
200 |
$360.00 |
|
1.35 |
225 |
$303.75 |
|
0.90 |
250 |
$225.00 |
|
0.45 |
275 |
$123.75 |
|
0 |
300 |
0 |
Suppose Gilberto and Juanita form a cartel and behave as a monopolist. The profit-maximizing price is (1) $______ per gallon, and the total output is (2) ___ gallons.
As part of their cartel agreement, Gilberto and Juanita agree to split production equally. Therefore, Gilberto's profit is (3) $____, and Juanita's profit is (4) $_____.
Suppose that Gilberto and Juanita 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, Gilberto says to himself, "Juanita and I aren't the best of friends anyway. If I increase my production to 25 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."
After Gilberto implements his new plan, the price of water (5) (increases/decreases) to (6) $____per gallon. Given Gilberto and Juanita's production levels, Gilberto's profit becomes (7) $____ and Juanita's profit becomes (8) $______.
Because Gilberto has deviated from the cartel agreement and increased his output of water to 25 gallons more than the cartel amount, Juanita decides that she will also increase her production to 25 gallons more than the cartel amount.
After Juanita increases her production, Gilberto's profit becomes (9) $_____, Juanita's profit becomes (10) $_____ and total profit (the sum of the profits of Gilberto and Juanita) is now (11) $_____
(12) True or False: Based on the fact that both Gilberto and Juanita increased production from the initial cartel quantity, you know that the output effect was smaller than the price effect at that quantity.
Gilberto and Juanita have each cheated on their cartel agreement and increased production by 25 gallons more than the cartel amount. However, they both realize that if they continue to increase output beyond this amount, they'll each suffer a decrease in profit. (To see this for yourself, consider Gilberto's profit 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 Gilberto nor Juanita has an incentive to further increase output, nor does either have an incentive to decrease output. This outcome is an example of
(13) (resale price maintenance/ predatory pricing/ tying/ a Nash equilibrium).
