fill $in$ the blanks and answer for $me$ Consider a town $in$ which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell $as$ much water $as$ they want $atnocost.$ 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$)$

$(Gallonsof$ water$)$

$(Dollars)$

$3\mathrm{.}0000$

$2\mathrm{.}7550138$

$2\mathrm{.}50100250$

$2\mathrm{.}25150338$

$2\mathrm{.}00200400$

$1\mathrm{.}75250438$

$1\mathrm{.}50300450$

$1\mathrm{.}25350438$

$1\mathrm{.}00400400$

$0\mathrm{.}75450338$

$0\mathrm{.}50500250$

$0\mathrm{.}25550138$

$06000$

Suppose Sean and Yvette form a cartel and behave $as$ a monopolist. The profit$-$maximizing price $is$

$

per gallon, and the total output $is$

gallons. $As$ part $of$ their cartel agreement, Sean and Yvette agree $to$ split production equally. Therefore, Sean's profit $is$

$

$,$ and Yvette's profit $is$

$

$.$

Suppose that Sean and Yvette 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, Sean says $to$ himself, "Yvette and I aren't the best $of$ friends anyway. $If$ I increase $my$ production $to50$ gallons more than the cartel amount, I can increase $my$ profit even though her profit goes down. I will $do$ that starting tomorrow."

After Sean implements his new plan, the price $of$ waterincreases $to$

$

per gallon. Given Yvette and Sean's production levels, Sean's profit becomes

$

and Yvette's profit becomes

$

$.$

Because Sean has deviated from the cartel agreement and increased his output $of$ water $to50$ gallons more than the cartel amount, Yvette decides that she will also increase her production $to50$ gallons more than the cartel amount.

After Yvette increases her production, Sean's profit becomes

$

$,$ Yvette's profit becomes

$

$,$ and total profit $(the$ sum $of$ the profits $of$ Sean and Yvette$)is$ now

$

$.$

Note that Sean and Yvette started $by$ behaving cooperatively. However, once Sean decided $to$ cheat, Yvette decided $to$ cheat $as$ well. $In$ other words, Yvette's output decisions are based $on$ Sean's actions.

This behavior $isan$ example $of.$