Question: Return to the cartel in Problem 1 . Suppose that after the cartel is established, one firm decides to cheat on collusion, assuming that the

Return to the cartel in Problem

1 .

Suppose that after the cartel is established, one firm decides to cheat on collusion, assuming that the other firm will continue to produce its half of the monopoly output. a

.

Given the deviating firm

s assumption, how much will it produce? b

.

If the deviating firm

s assumption is correct, what will be the industry price and the deviating firm

s profit in this case?

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