2. Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand and marginal revenue curves for the product. Price 3.00 2.50 1.50 1.00 2000 Ouwty 1000 20h0 4000 Refer to the figure above. Quick Buck and Pushy Sales have agreed to each produce half the profit-maximizing monopolist quantity, set the monopoly price and split the profits evenly. Suppose Quick Buck can cheat on Pushy Sales and reduces its price to $1.00 each while Pushy Sales continues to comply with the collusive agreement. a. Find the economic profit for both firms if they cooperate and charge the same price. b. Find the economic profit for both firms if Quick Buck breaks the agreement and charges a lower price.

2. Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand and marginal revenue curves for the product. Price 3.00 2.50 1.50 1.00 2000 Ouwty 1000 20h0 4000 Refer to the figure above. Quick Buck and Pushy Sales have agreed to each produce half the profit-maximizing monopolist quantity, set the monopoly price and split the profits evenly. Suppose Quick Buck can cheat on Pushy Sales and reduces its price to $1.00 each while Pushy Sales continues to comply with the collusive agreement. a. Find the economic profit for both firms if they cooperate and charge the same price. b. Find the economic profit for both firms if Quick Buck breaks the agreement and charges a lower price.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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