3. A cartel of copper producers has three plants, their cost functions are as follows: CT1 = 25 + 5Q 2/6 CT2 = 38 + 2Q 5/10 CT3 = 40 + 3Q ¼ Q is expressed in tons per month. a) Tabulate the TC, CMe of each company for production levels between 1 and 10 tons per month. b) If the cartel decided to send 14 tons per month and set a price of $ 10,000 per ton, how should production be allocated among the companies? c) At this level of commercialization, which company has the greatest incentive to cheat? Does any company not?
3. A cartel of copper producers has three plants, their cost functions are as follows: CT1 = 25 + 5Q 2/6 CT2 = 38 + 2Q 5/10 CT3 = 40 + 3Q ¼ Q is expressed in tons per month. a) Tabulate the TC, CMe of each company for production levels between 1 and 10 tons per month. b) If the cartel decided to send 14 tons per month and set a price of $ 10,000 per ton, how should production be allocated among the companies? c) At this level of commercialization, which company has the greatest incentive to cheat? Does any company not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3. A cartel of copper producers has three plants, their cost functions are as follows:
CT1 = 25 + 5Q 2/6
CT2 = 38 + 2Q 5/10
CT3 = 40 + 3Q ¼
Q is expressed in tons per month.
a) Tabulate the TC, CMe of each company for production levels between 1 and 10 tons per month.
b) If the cartel decided to send 14 tons per month and set a price of $ 10,000 per ton, how should production be allocated among the companies?
c) At this level of commercialization, which company has the greatest incentive to cheat? Does any company not?
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