2. Deviating from the collusive outcomeMays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can ofbeer is constant and equals $0.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for eachfirm.Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this modelrequires that the two companies must equally share the output.)Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays andMcCovey choose to work together.(Dollars per can)PRICE1.000.900.800.700.600.500.400.300.200.1000DemandMC = ATCMR90 180 270 360 450 540 630 720 810 900QUANTITY (Cans of beer)Monopoly Outcome(2) When they act as a profit-maximizing cartel, each company will produceinformation, each firm earns a daily profit of $cans and charge $, so the daily total industry profit in the beer market is $Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume thetwo companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.Now, suppose that Mays decides to break the collusion and increase its output by decrease McCovey continues to produce the amount set under thecollusive agreement.increaseper can. Given thisMays's deviation from the collusive agreement causes the price of a can of beer to decrease to $$while McCovey's profit is now $Mays increases its output beyond the collusive quantity.per can. Mays's profit is nowwhenTherefore, you can conclude that total industry profit decreases

Cartels are formed with the aim of maximizing profits by reducing competition between members and…

2. Deviating from the collusive outcome Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together.

2. Deviating from the collusive outcome Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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the question is in the image attached.
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