Principles Of Economics 2e
Principles Of Economics 2e
2nd Edition
ISBN: 9781680920864
Author: Timothy Taylor, Steven A. Greenlaw, David Shapiro
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 3SCQ

Consider the curve in the figure below, which shows the market demand. marginal cost, and marginal revenue curve for firms in an oligopolistic industry. In this example, we assume firms have zero fixed costs.

Chapter 10, Problem 3SCQ, Consider the curve in the figure below, which shows the market demand. marginal cost, and marginal

  1. Suppose the firms collude to form a cartel. What price will the cartel charge? What quantity will the cartel supply? How much profit will the cartel earn?
  2. Suppose now that the cane] breaks up and the oligopolistic firms compete as vigorously as possible by cutting the price and increasing sales. What will be the industry quantity and price? What will be the collective profits of all firms in the industry?
  3. Compare the equilibrium price, quantity, and profit for the cartel and cutthroat competition outcomes.

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Consider the curve in Figure, which shows the market demand, marginal cost, and marginal revenue curve for firms in an oligopolistic industry. In this example, we assume firms have zero fixed costs.                                   a. Suppose the firms collude to form a cartel. What price will the cartel charge? What quantity will the carte supply? How much profit will the cartel earn? b. Suppose now that the cartel breaks up and the oligopolistic firms compete as vigorously as possible by cutting the price and increasing sales. What will be the industry quantity and price? What will be the collective profits of all firms in the industry? c. Compare the equilibrium price, quantity, and profit for the cartel and cutthroat competition outcomes.
Consider the curve shown in the figure below, which shows the market demand, marginal cost, and marginal revenue curve for firms in an oligopolistic industry. (MC curve is horizontal because it is assumed that the fixed costs are 0 for all firms and the AVC is constant, so ATC=AVC=MC.) Suppose the firms collude to form a cartel. What price will the cartel charge? What quantity will the cartel supply? How much profit will the cartel earn? Suppose now that the cartel breaks up and the oligopolistic firms compete as vigorously as possible by cutting the price and increasing sales. What will the industry quantity and price be? What will the collective profits be of all firms in the industry? Compare the equilibrium price, quantity, and profit for the cartel and cutthroat competition outcomes.
The table shows the demand schedule for a particular product.    Quantity  Price 0 100 300 90 600 80 900 70 1200 60 1500 50 1800 40 2100 30 2400 20 2700 10 3000 0 Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?    a. $40    b. $50     c. $60     d. $70       e. $80

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