Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Demand and cost conditions for the Chewing Gum Industry $4 MC .40 .35 .31 3.30 ATC D .25 MR Q Packs of chewing gum in thousands 12 14 16 Figure 14.1 Refer to Figure 14.1. Six firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. To maximize profits, the cartel should produce packs of chewing gum and the price should be O a. 14,000; $.30 O b. 12,000; $.40 O c. 16,000; $.35 O d. 12,000; $.25 Dollars.

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Demand and cost conditions for the Chewing Gum Industry $4 MC .40 .35 .31 3.30 ATC D .25 MR Q Packs of chewing gum in thousands 12 14 16 Figure 14.1 Refer to Figure 14.1. Six firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. To maximize profits, the cartel should produce packs of chewing gum and the price should be O a. 14,000; $.30 O b. 12,000; $.40 O c. 16,000; $.35 O d. 12,000; $.25 Dollars.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Breakdown of a cartel agreement Consider a town in which only two residents, Jacques and Kyoko, own wells that produce water safe for drinking. Jacques and Kyoko 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.
Why has the Federation of Quebec Maple Syrup Producers been a successful cartel in Quebec, Canada? Has the relatively weak government structure of Quebec allowed for this organizations success?
Coke and Pepsi dominate the cola market. Suppose that the marginal cost of making cola is $2. Assume also that the demand for cola is given by the following table: Price $8 7 6 5 4 3 2 1 Quantity 5 cans 6 7 8 9 10 11 12 Suppose Coke and Pepsi both supply cola. They form a cartel and agree to cooperate on how much soda to produce. In this cartel case, how many bottles of cola would be sold? Type your answer...
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4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60. a. If the firms stick to their agreement (cooperate), how much per-period profit do they each make? b. If they are not able to maintain their agreement (compete), what is their per-period profit? c. If one firm cheats on their agreement (deviate), how much does each firm make? Be sure to specify both the profit for the cheater and the firm cheated-on. d. Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel…
Suppose there are two firms in the market, Firm A and Firm B. The total market demand is given by P=40- 2.5Q, MR=40-5Q, and MC=ATC=$10. What is the profit maximizing price for a cartel? a. $30 b. $20 C. $25 d. $35
Its in the picture.
Consider a market with 4 firms. If all 4 firms enter into a cartel arrangement, then the demand curve facing the cartel is: a. identical to the monopolist's demand curve b.. perfectly elastic c. perfectly inelastic d. the marginal revenue curve
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3. Breakdown of a cartel agreement Consider a town in which only two residents, Hubert and Kate, own wells that produce water safe for drinking. Hubert and Kate 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. is Price (Dollars per gallon) 5.40 4.95 4.50 4.05 3.60 3.15 2.70 2.25 1.80 1.35 $ 0.90 0.45 0 Suppose Hubert and Kate form a cartel and behave as a monopolist. The profit-maximizing price is $ per gallon, and the total output gallons. As part of their cartel agreement, Hubert and Kate agree to split production equally. Therefore, Hubert's profit is and Kate's profit is $ Quantity Demanded (Gallons of water) 0 25 50 75 100 125 150 175 200 225 250 275 300 Suppose that Hubert and Kate have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Hubert says to himself, "Kate…
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