Question

$2.75 $0.00 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. 1st attempt Part 1 (1 point) See Hint If Aquataste sticks to the agreement, Waterland has an incentive to renege on the agreement by producing 350 gallons because Waterland's profits would then increase from $375 to $ (Provide your answer to two decimal places.) Part 2 (1 point) 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 s which is better than the $312.50 Waterland would earn by sticking with the agreement. (Provide your answer to two decimal places.) 8 OF 20 QUESTIONS COMPLETED < 09/20 > SUBMIT ANSWER

Answer 1

Part 1 When Aquataste sticks while Waterland increases its production by 200 gallons then puice in decreases from 1.50 to 1.25 . Total Profit 750 312.5 Profit of Aquataste = B 250 units X 1.250 a to I Profit of Waterland - 350 units X 1.25=(43705) increases from $375 to 2. Profit of Waterland ( 437.507. I am Scanner

Part 2 When both produces 350 gallons than total production would be 780 gallons & pecce I would be $1. Total Profit at $1 700 . Each Aquataste & Waterland get 700 __ = 350) - But Ý Waterland sticks to its production & produce 250 gallons then price would be I $1.25 priorit of wateuland = 1.25X850=_312,5 » Waterland would be better off when it also breaks agreement and produce 350 gallons as it I will increase Waterland's Prelit 0 to $350).