Question

Assume the Hand Tool Manufacturing Industry Trade Association recently published the following estimates of demand and supply relations for hammers:
QD = 60,000 - 10,000P (Demand),
QS = 20,000P (Supply).
A. Calculate the perfectly competitive industry equilibrium price/output combination.
B. Now assume that the industry output is organized into a cartel. Calculate the industry price/output combination that will maximize profits for cartel members.
C. Compare your answers to parts A and B. Calculate the price/output effects of the cartel.



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  • CreatedFebruary 13, 2015
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