Question: Question 4 (15 total marks) Oligopoly (Centralized Cartel) Consider an industry that consists of 4 firms, all competing over the same market, given by the

Question 4 (15 total marks) Oligopoly (Centralized Cartel) Consider an industry that consists of 4 firms, all competing over the same market, given by the following demand equation: P230 3 Q All firms have the same Total lCost Function, given by: It] = 10:}, +2 qf Suppose the firms decide to collude and voluntarily restrict output and raise price, in order to increase profits. a} What price will be charged by the members of the cartel? (4 marks} Assume the head of the cartel is fair and distributes output qj equally among the 4 firms [since they have identical costs}. h)What is the output of each individual firm? (2 marks) c} What is each individual firm's profit? (2 marks) We know that there is a built-in incentive for cartel members to cheat on the cartel. If, as a result, the cartel breaks down: d) What price will be charged in the market? (2 marks) e) Assuming each firm captures an equal share of the market, what now is each firm's output, q; ? (2 marks) f) What now is individual firm profit? (1 mark) g) Illustrate your answer (2 marks) P

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