2. Deviating from the collusive outcome Stargell and Schmidt are brewing companies that operate in a duopoly (tworm oligopoly]. The daily marginal cost (MC) of producing a can of beer is constant and equals $1.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each rm. Suppose that Stargell and Schmidt form a cartel, and the rms divide the output evenly. (Note: This is onlyr for convenience; nothing in this model requires that the two companies must equally share the output.) Pic-ice the biack point (plus symboi) on the foifowing graph to indicate the prot-maximizing price and combined quantity of output if Stargeii and Schmidt choose to work together. Monopoly Outcome E\" W o a. D. 2 E B Q LIJ Q n: D. so 120 150 130 210 240 270 zoo QUANTITY {Cans of beer) when they act as a protemaximizing cartel, each company will produce E cans and charge per can. Given this information, each rm earns a dailyr prot 0- , so the daily total industry prot in the beer market is . Oligopolists often behave noncooperativehur and act in their own self-interest even though this decreases total prot in the market. Again, assume the two companies form a cartel and decide to work together. Both rms initiallg.r agree to produce half the quantity that maximizes total industry.r profit. Now, suppose that Stargell decides to break the collusion and increase its output by 55%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to V to per can. Stargell's profit is HOW , while Schmidt's prot is now . Therefore, you can conclude that total industry prot 7 when Stargell increases its output bevond the collusive quantity