constant and equals $0.60 per can. Also, assume that neither firm had any startup costs. That is, marginal cost equals average cost (AC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience, since nothing in the model requires that the two companies 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 work together. Note: Drop lines will extend to both axes automatically.

constant and equals $0.60 per can. Also, assume that neither firm had any startup costs. That is, marginal cost equals average cost (AC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience, since nothing in the model requires that the two companies 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 work together. Note: Drop lines will extend to both axes automatically.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 3E

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. 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 $0.60 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.)
1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC= 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. a. How much would each firm produce if they form the cartel? Why?
OS 2. Deviating from the collusive outcome Stargell and Schmidt are 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 Stargell and Schmidt 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.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together. PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 MC = ATC MR 0 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Cans of beer) +. Monopoly Outcome When they act as a profit-maximizing cartel, each company will produce information, each…
bok rint An oligopoly producing a homogeneous product is comprised of three firms that act like a cartel. Assume that these three firms have identical cost schedules. Assume also that if any one of these firms sets a price for the product, the other two firms charge the same price. As long as they all charge the same price they will share the market equally; and the quantity demanded of each will be the same. Below is the total-cost schedule of one of these firms and the demand schedule that confronts it when the other firms charge the same price as this firm. Complete the marginal-cost and marginal- revenue schedules facing the firm. erences Mc Graw Hill Output Total cost Marginal cost Price Quantity demanded Marginal revenue 0 1 23456 7 8 $0 180 300 480 720 1,020 1,380 1,800 2,280 Short Anewor LA JUL 26 $780 720 660 600 540 480 420 360 Toolbar navigation (a) What price would be charged, what output would be produced, and what profit would be made by this firm? (b) If the firms…
When comparing two firms operating as a cartel/colluding and two firms competing in Cournot competition, given the firms face the same inverse market demand and marginal cost is the same for both firms in either situation, which of the following is true? а. The total profit is the same in Cournot competition and collusion. O b. Total output is higher in collusion than in Cournot competition and the price is lower in collusion than in Cournot Competition. Ос. The total profit is lower in Cournot competition than in collusion. O d. Total output is lower in collusion than in Cournot competition and the price is higher in collusion than in Cournot Competition.
Suppose Farmer Smith from Kansas and Farmer Jones from Missouri agree to restrict their combined output of wheat in an attempt to increase the price and profits. How likely do you think the Smith-Jones cartel is to suceed? Explain.
5. Two duopolistic oil producers are faced with the total demand function of P = 180– Q and the following cost functions: MC1 = 30 + Q1 MC2 = 20 + 2Q2 a. Determine the optimal levels of output, using the Cournot solution. b. What are the optimal outputs, if the two firms form a cartel
6. 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 $0.40 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.) 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 work together.
Seagate and Western Digital (WD) run a cartel producing identical 1 TB hard drives. The demand for hard drives is Q = 17 – P. They both have MC = 2 and no fixed cost so ATC = 2. This is a lot like the Coke-Pepsi game in the duopoly quantity_game video. You can verify that together the firms maximize their (combined) profit by each making 3.75 hard drives. What profit does Seagate make with this cartel agreement? $
2. Deviating from the collusive outcome Stargell and Schmidt are 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 $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Stargell and Schmidt 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.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together. ? PRICE (Dollars per can) 1.20 1.00 0.80 0.60 0.40 0.20 ༞ ༔ ༔ ༔ ༔ ༔ ༔ ༔ ༔ ༔ Demand MR MC = ATC 0 0 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) + Monopoly Outcome When they act as a profit-maximizing cartel, each company will produce charge $ per can.…
2. Deviating from the collusive outcome Stargell and Schmidt are 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 Stargell and Schmidt 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.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together. PRICE (Dollars per can) 1.00 0.90 080 0.70 0.60 0.50 0:40 0.30 0.20 0.10 0 Demand 20 40 MC ATC MR 60 80 100 120 140 160 180 200 QUANTITY (Cans of beer) When they act as a profit-maximizing cartel, each company will produce information, each firm earns a daily profit of S…
2. Deviating from the collusive outcome Stargell and Schmidt are 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 Stargell and Schmidt 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.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together. PRICE (Dolars per can) 1.00 090 080 0.70 080 0.50 6.40 0.30 0:30 6.10 0 Demand D 20 40 MR 60 00 100 120 140 QUANTITY (Cans of beer) MC ATC 140 160 200 Monopoly Outcome