1. In which of the following situations would each of the members be responsible
ID: 2440566 • Letter: 1
Question
1.
In which of the following situations would each of the members be responsible for producing an equal share of the total amount of output sold by the cartel engaged in joint profit maximization?
A) When the amount of revenue generated by each member of the cartel is the same.
B) When there are no economies of scale in production.
C) When each member of the cartel is using the same scale of production.
D) When marginal costs of production are the same for each of the members of the cartel.
2.
Which of following is not a condition that must be met for a cartel to maximize its joint profits?
A) Total output by the cartel must be allocated among the member firms such that the individual firm's marginal costs are equal.
B) The cartel must produce the level of output at which its marginal revenues and marginal costs are equal.
C) The cartel must be operating in the inelastic portion of its demand curve.
D) Each member firm must employ the least-cost method of production.
3.
Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits. Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being?
A) Collusion.
B) Price leadership.
C) Formation of cartels.
D) Investment in research and development.
Explanation / Answer
1.
D) When marginal costs of production are the same for each of the members of the cartel.
Because cartel members choose their combined output at the level where their combined marginal revenue equals their combined marginal cost for profit maximization. In a situation where each member is responsible for producing an equal share of the total amount of output, marginal cost of production should be same for each member of the cartel for joint profit maximization.
3.
D) Investment in research and development.
All other forms lead to unhealthy competition while investment in research and development reduces the effects of negative competition and improves their economic profits.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.