Table 16-7
Suppose the countries of Xania and Pluntia share the world supply of water. Suppose that the marginal cost of bottling water is a constant $4 per gallon, and the demand for water is described by the following schedule:

-Refer to Table 16-7.If Xania and Pluntia formed a cartel and decided to split the market evenly,what would Pluntia's production be if Pluntia maintained the agreement?
A)50
B)100
C)150
D)200

Question

Table 16-7
Suppose the countries of Xania and Pluntia share the world supply of water. Suppose that the marginal cost of bottling water is a constant $4 per gallon, and the demand for water is described by the following schedule:
 
-Refer to Table 16-7.If Xania and Pluntia formed a cartel and decided to split the market evenly,what would Pluntia's production be if Pluntia maintained the agreement?
A)50 
B)100 
C)150 
D)200

Quizplus · Accepted Answer

If the market is split evenly, each country will produce half of the total market quantity. Thus, total market quantity will be 200 gallons (100 + 100).
If Pluntia maintains the agreement, its production will be half of the total market quantity, which is 100 gallons. However, this production level will not maximize Pluntia's profit since it can increase its production level and earn more profit. Thus, the best choice for Pluntia's production will depend on the market conditions and its cost structure, and cannot be determined solely based on the information given.

Table 16-7 Suppose the Countries of Xania and Pluntia Share the World