Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firmoligopoly). 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 equalsaverage 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 twocompanies 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 worktogether.PRICE (Dollars per can1.000.000.800.700.600.500.400.300.200.100DemandMC ATC0 40 80 120 160 200 240 280 320 360 400QUANTITY (Thousands of cans of beer)Monopoly OutcomecansWhen they act as a profit-maximizing cartel, each company will produceand chargeper can. Given this information, each firm earns a daily profit of, so the daily total industry profit in the beer market isOligopolists often behave noncooperatively and act in their own self-interest even thoughthis decreases total profit in the market. Again, assume the two companies form a carteland decide to work together. Both firms initially agree to produce half the quantity thatmaximizes total industry profit. Now, suppose that Mays decides to break the collusionand increase its output by 50%, while McCovey continues to produce the amount setunder the collusive agreement.Mays's deviation from the collusive agreement causes the price of a can of beer toper can. Mays's profit is nowtois nowTherefore, you can conclude that total industry profitMays increases its output beyond the collusive quantity.while McCovey's profitwhen

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

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.)

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.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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