The following table shows the demand for Good X, which is only produced by two firms....

 

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The following table shows the demand for Good X, which is only produced by two firms. These two firms have just formed a cartel. Suppose that the two firms have a constant marginal cost and an average total cost of $55. Quantity (thousands of units) 0 1 2 3 4 5 6 7 Price (dollars per unit) 100 95 90 85 80 75 70 65 a. What are the cartel's profit-maximizing output and price? b. What are the output and profit for each firm? c. What will happen to the profits of both firms if one of them cheats and increases its output by 1,000 units, while the other doesn't? The following table shows the demand for Good X, which is only produced by two firms. These two firms have just formed a cartel. Suppose that the two firms have a constant marginal cost and an average total cost of $55. Quantity (thousands of units) 0 1 2 3 4 5 6 7 Price (dollars per unit) 100 95 90 85 80 75 70 65 a. What are the cartel's profit-maximizing output and price? b. What are the output and profit for each firm? c. What will happen to the profits of both firms if one of them cheats and increases its output by 1,000 units, while the other doesn't?

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a Cartels ProfitMaximizing Output and Price Marginal Cost MC Average Total Cost ATC 55 constant Marg... View the full answer