Market Price($) 400 Last Row was put there on accident. a. If the four countries

Question

Market Price($)

400

Last Row was put there on accident.

a. If the four countries create a cartel and agree to mimic monopoly-like
behavior, what level of output would each individual firm produce? What is
each firm’s profit? (2 pts.)
b. Assume that Country A cheats on the cartel agreement by producing 200
more barrels than the other three countries.
i. What is the new market price when Country A cheats? (1 pt.)
ii. What is the new profit earned by Country A? What profit does each
of the other three countries make? (2 pts.)

Total Market output (Barrels of Oil)

Market Price($)

Profit ($)

400

80 600 70 800 60 1000 50 1200 40 1400 30 1600 20

Explanation / Answer

a. each firm will produce at level of 1000 and each firms profit will be $2000

b. i. the price will be $40

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