The data for two firms (Firm 1 and Firm 2) are given below. There is no fixed
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The data for two firms (Firm 1 and Firm 2) are given below. There is no fixed cost.
P | Q | TR | MR | TC | MC | Profit |
45 | 1 | $45 | 45 | 10 | 10 | $35 |
40 | 2 | $80 | 35 | 20 | 10 | $60 |
35 | 3 | $105 | 25 | 30 | 10 | $75 |
30 | 4 | $120 | 15 | 40 | 10 | $80 |
25 | 5 | $125 | 5 | 50 | 10 | $75 |
20 | 6 | $120 | -5 | 60 | 10 | $60 |
15 | 7 | $135 | -15 | 70 | 10 | $3 |
10 | 8 | $80 | -25 | 80 | 10 | $0 |
a. Complete the above table. (4 marks)
b. If the market were perfectly competitive, what would the price and quantity be?
(2marks)
c. If the two firms collude and form a cartel, what is the joint profit-maximizing level of output and price?
(4 marks)
d. If the two firms split the market evenly, what would be Firm 1's production and profit?
(2 marks)
- What would happen to Firm 2's profit if it increased its production by one unit while Firm 1 stuck to the cartel agreement?
Related Book For
Engineering Mechanics Dynamics
ISBN: 9781118885840
8th Edition
Authors: James L. Meriam, L. G. Kraige, J. N. Bolton
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