6. 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 $0.60 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. 1.00 Demand 0.90 Monopoly Outcome 0.80 0.70 MC = ATC 0.60 0.50 0.40 0.30 0.20 0.10 MR + 30 60 120 150 180 210 240 270 300 06 QUANTITY (Thousands of cans of beer) cans and charge $ so the daily total industry profit in the beer market is $ When they act as a profit-maximizing cartel, each company will produce per can. Given this information, each firm earns a daily profit of $ PRICE (Dollars per can)

6. 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 $0.60 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. 1.00 Demand 0.90 Monopoly Outcome 0.80 0.70 MC = ATC 0.60 0.50 0.40 0.30 0.20 0.10 MR + 30 60 120 150 180 210 240 270 300 06 QUANTITY (Thousands of cans of beer) cans and charge $ so the daily total industry profit in the beer market is $ When they act as a profit-maximizing cartel, each company will produce per can. Given this information, each firm earns a daily profit of $ PRICE (Dollars per can)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Isolated Island has two wind turbines producing electricity, one owned by Dick and the other owned by Harry. Quantity demanded (units per day) Price (dollars per unit) The marginal cost of producing electricity is $4 a unit. 12 11 1 The table gives the demand schedule for electricity in this area. 10 2 9 3 If Dick and Harry form a cartel and maximize their joint profit, what will be the price of electricity and the total quantity produced? 8 4 7 5 If Dick and Harry form a cartel and maximize their joint profit, the price of a unit of electricity is $ and the quantity produced is units a day. 6 7
CS 25 Economics
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Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 360-- Assume for simplicity that each firm operates with zero total cost. Suppose that two firms collude. How much more profit each firm can obtain relative to Cournot competition? 8000 14400 7200 16000
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3. Breakdown of a cartel agreement Consider a town in which only two residents, Gregor and Haidy, own wells that produce water safe for drinking. Gregor and Haidy can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price (Dollars per gallon) 4.80 4.40 4.00 3.60 3.20 2.80 2.40 2.00 1.60 1.20 0.80 0.40 0 Quantity Demanded (Gallons of water) 0 35 70 105 140 175 210 245 280 315 350 385 420 Total Revenue (Dollars) 0 $154.00 $280.00 $378.00 $448.00 $490.00 $504.00 $490.00 $448.00 $378.00 $280.00 $154.00 0 Suppose Gregor and Haidy form a cartel and behave as a monopolist. The profit-maximizing price is $ output is S per gallon, and the total gallons. As part of their cartel agreement, Gregor and Haidy agree to split production equally. Therefore, Gregor's profit is , and Haidy's profit is $ Suppose that Gregor and Haidy have been successfully operating as a cartel. They each charge the…
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 $0.60 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. ? PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 MR MC = ATC 0 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Cans of beer) Monopoly Outcome When they act as a profit-maximizing cartel, each company will produce charge cans and per can.…
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