1. Consider a market for water with two firms. We assume two firms can produce e. In the equilibrium found in part d, find the non-cooperative market outcome: the good without any cost (TC = 0). The...

*YOU ONLY NEED TO ANSWER QUESTION C*

Extracted text: 1. Consider a market for water with two firms. We assume two firms can produce e. In the equilibrium found in part d, find the non-cooperative market outcome: the good without any cost (TC = 0). The market demand schedule is given as: market quantity, price, and each firm's profit. Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 Number of sellers & Market outcome: 70 50 As a new firm enters the market, now there are three firms in the market. Colluding is not allowed by the government, so they are in competition. 80 40 f. How much would each firm produce? [Hint: Begin with the cartel situation. 06 30 Check if a firm can increase its profit by cheating.] 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. g. Find the non-cooperative market outcome: market quantity, price, and each firm's profit. a. How much would each firm produce if they form the cartel? Why? b. Find the cartel market outcome: market quantity, price, and each firm's profit. Competition: After they form the cartel, each firm can choose to cheat at the agreement or to follow the cartel contract. Assume firms are always self-interested, and make only one-time decision in this game. c. Now, is there any incentive for a firm to cheat the other firm? Why? [Hint: Begin with the cartel situation. Check if a firm can increase its profit by cheating.] d. In the end, how much would each firm produce in the competition? In other words, find the Nash equilibrium. [Hint: Check if any firm has an incentive to increase or decrease its supply for each output level.]