Question

True or False: Based on the fact that both Tim and Alyssa increased production from the initial cartel quantity, you know that the output effect was smaller than the price effect at that quantity.

Answer 1

Answer: false

Explanation:

Consider a town in which only two residents, Tim and Alyssa, own wells that produce water safe for drinking. Tim and Alyssa can pump and sell as much water as they want at no cost. For them, the total revenue equals profit.