Only two firms, ABC and MNO, sell a particular product. The following table shows the demand curve fortheir product. Each firm has the same constant marginal cost of $4 and zero fixed cost.Quantity Demanded(Units)0510152025Price(Dollars per unit)14131211109876543210303540455055606570Total Revenue(Dollars)065120165200225240245240225200165120650Total Cost(Dollars)020406080100120140160180200220240260280Refer to the table above and explain:A). If ABC and MNO operate to jointly maximize profits, then what is the price? $9B). If ABC and MNO operate to jointly maximize profits, then what quantity is sold? 25IProfit(Dollars)0458010512012512010580450-55-120-195-280C). If ABC and MNO operate to jointly maximize profits and agree to share the profit equally, then howmuch profit will each of them earn? $62.5D). ABC and MNO agree to maximize joint profits. However, while ABC produces the agreed-upon amount,MNO breaks the agreement and produces 5 more than agreed. How much profit does MNO make? $120. E). ABC and MNO agree to jointly maximize profits. If ABC and MNO each break the agreement and eachproduce 5 more than agreed upon, how much less profit does each make, compared to the profit at the carteloutput?F). If this market were perfectly competitive instead of oligopolistic, what would the price be?G). If this market were perfectly competitive instead of oligopolistic, what quantity would be produced?

A duopoly is a type of oligopoly market in which two firms sell a product to a large number of…

Answered: E). ABC and MNO agree to jointly…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that all firms in an industry collude to reduce output, which raises the product price to $7.86 and requires the perfectly competitive firm in the figure to the right to reduce its output from 500 units to 200 units. What is the total dollar amount of this typical perfectly competitive firm's economic incentive to join the proposed cartel, assuming that after the fact, no firms cheat on the specified cartel agreement? Explain your reasoning. In the absense of collusion among the firms, the typical perfectly competitive firm's economic profits are average total cost. because price Using the rectangle drawing tool, show the amount of economic profits for the typical perfectly competitive firm if it joins the cartel Label this area 'Profits." Carefully follow the instructions above, and only draw the required object If ATC $5.33 at the reduced output of 200 units, then the typical firm's economic incentive to participate in the cartel is $(Enter your response as a whole number.)…
*YOU ONLY NEED TO ANSWER QUESTION B*
If Gulfstream and Bombardier, both producers of upscale jet airplanes, were to collude rather than compete, consumers could expect: Group of answer choices A) higher prices and higher quantities offered for sale. B) higher prices and lower quantities offered for sale. C) one firm to emerge as the price leader in the oligopoly. D) lower prices and lower quantities offered for sale. E) each firm to cheat on the cartel agreement.
The diagram illustrate an industry under oligopoly consisting of 10 equal-sized firms, and a particular firm in that industry. Each of the firms produces an identical product. To what output will an individual firm be restricted if the price is to be maintained?Assume that all firms are permitted to produce the same level of output. If the other firms stick to this output, how much would an individual firm be tempted to produce if it wished to maximize its own profit at the agreed price? If it undercut the cartel price, what and output would maximize its profit (assuming the other members did not retaliate)?
If a market structure is an oligopoly, do Lexus, Cadillac, and Lincoln engage in sticky pricing? Who is the market leader?
Consider a duopolistic market with an inverse demand curve P(Q) = 460 − 4Qand constant marginal costs for each firm that are given by MC(Q) = 10.Assume fixed costs are negligible. The two identical firms are competing in this market by choosing their production quantities simultaneously. In the equilibrium, each firm produces 37.5 units and the prevailing market price is 160. How would the joint profits of these two firms change if they successfully formed a cartel? Change in joint profits: ? (Enter your answer rounded to two decimal places; include a negative sign if appropriate.)
Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the short-run Phillips curve that is consistent with these expectations, assuming that it is parallel to SRPC₂- Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy. The inflation rate at point C is unemployment rate at point A. the inflation rate at point A, and the unemployment rate at point C is Was the central bank able to achieve its goal of lowering…
Would it be answer 1? Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases output, 1)both firms' profits increase. 2)firm A's profits increase and firm B's profits decrease. 3)firm B's profits increase and firm A's profits decrease. 4)both firms' profits decrease. 5)firm A's profits increase and firm B's profits do not change.
. 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.)
Suppose Canon raised the price of its printers, but Hewlett-Packard (the largest seller) refused to follow. Two years later, Canon cut its price, and Hewlett-Packard retaliated with an even deeper price cut, which Canon was forced to match. For the next five years, Hewlett- Packard raised its prices five times, and each time, Canon followed suit within 24 hours. The model underlying the pricing behavior of these firms is the: Cartel model O Perfect competition model Nonprice competition model Price leadership model
1
Consider a market with two firms managed by Harry and Vera. Under a cartel (both firms pick the high price), each firm earns a profit of $85. Under a duopoly (both firms pick the low price), each firm earns a profit of $70. If the two firms pick different prices, the high-price firm earns a profit of $25 and the low-price firm earns a profit of $100. This is depicted in the payoff matrix to the right. The outcome of the pricing game is Vera High Price Low Price O A. Harry and Vera both pick the high price. O B. Harry picks the low price and Vera picks the high price. OC. Harry picks the high price and Vera picks the low price. O D. Harry and Vera both pick the low price. Наrry $85 $100 High Price $85 $25 $25 $70 The outcome identified above is a Nash equilibrium because neither firm has an incentive to Low Price $100 $70 O A. pick the high price given that the other player is picking the low price. O B. pick the high price given that the other player is picking the high price. O C.…

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