P 14 13 12 11 10 9 8 7 6 5 QD 50 100 150 200 250 300 350 400 450 500 Consider a market with the above demand and two firms. Both firms have a constant marginal cost of 7. 1. What price should these firms charge to maximize total industry profit? (Note: the marginal condition we learned will work here but you need to be careful because the changes in quantity on the schedule are not 1. Because of this, you might want to use a brute force approach here. It's worth thinking about how you would reconcile it with the marginal condition though. Also, the marginal condition doesn't match exactly so take the best number from the schedule.) 2. Assuming that if they set the same price, they split the market evenly, what will the profit of each firm be if they both set the above price? 3. Now imagine that the firms agree to both set the above price. Also, let's assume that if one firm were to set a price lower than the other they will get the entire market. (Recall that this is what we assumed way back when we were talking about perfectly competitive markets.) In this case what would the profit of a firm be if they cheated on the agreement and set their price one dollar lower than the agreed upon price? (Assume that the other firm does not cheat.)
P 14 13 12 11 10 9 8 7 6 5
QD 50 100 150 200 250 300 350 400 450 500
Consider a market with the above demand and two firms. Both firms have a constant marginal cost of 7.
1. What
2. Assuming that if they set the same price, they split the market evenly, what will the profit of each firm be if they both set the above price?
3. Now imagine that the firms agree to both set the above price. Also, let's assume that if one firm were to set a price lower than the other they will get the entire market. (Recall that this is what we assumed way back when we were talking about
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