Reference: Ref 11-3 (Figure 11.1) The graph depicts the market demand curve for

Question

Reference: Ref 11-3

(Figure 11.1) The graph depicts the market demand curve for a two-firm industry. If the two firms collude and evenly split the market output, how much output will each firm produce?

Reference: Ref 11-4

(Figure 11.2) The graph depicts the market demand curve for a two-firm industry, an industry with no fixed costs. Suppose that the two firms are colluding by acting like a monopolist, with each firm producing half the market output. If one of the firms cheats on the cartel agreement and produces an additional unit of output, its profits will rise from:

Explanation / Answer

When two firms collude, they together act like monopolist.

For profit maximising equilibrium, MR=MC

MR=MC at Q=3

With a total of 300 units of output, both firm will produce 150-150 units

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.