Colombia and Brazil are two of the major suppliers of coffee globally, each accounting for the production of roughly 30 percent of all coffee consumed. Suppose that Colombia and Brazil both have the same marginal cost, MCC=20 + 120qc and MCB=20 + 120qB. There are also many smaller coffee producing nations that operate competitively. Suppose that after substracting supply of these smaller nations from global demand, the remaining demand is P= 720-20Q which implies that MR=720-40Q :Determine the optimal quantity of coffee that Columbia and Brazil should each produce and the global market price they should establish if they collude (you can think of the price being for a 100 kilogram bag of raw coffee beans).
Colombia and Brazil are two of the major suppliers of coffee globally, each accounting for the production of roughly 30 percent of all coffee consumed. Suppose that Colombia and Brazil both have the same marginal cost, MCC=20 + 120qc and MCB=20 + 120qB. There are also many smaller coffee producing nations that operate competitively. Suppose that after substracting supply of these smaller nations from global demand, the remaining demand is P= 720-20Q which implies that MR=720-40Q :Determine the optimal quantity of coffee that Columbia and Brazil should each produce and the global market price they should establish if they collude (you can think of the price being for a 100 kilogram bag of raw coffee beans).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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