Answer 4 and 4 2) Assume that there are 2 firms producing an identical product. Both firms have the same total cost function TC(q)= q². The inverse demand function for the firms' output is p= 120 Q, where Q is the total output and p is price.1. What are the equilibrium price, output and profits of each firm if they are competing with each other? (Hint:Consider the equilibrium in a Cournot game.)2. What happens if they form a cartel? Calculate the equilibrium price, output, and profits for the cartel?3. If a single firm cheated. what would its output and profits be, assuming the other firm maintains the cartelprice? Calculate the new outputs and profits for both firms.4. Discuss why it is hard to enforce a cartel. Explain using words. DO NOT do any calculations. DO NOT draw anygraphs.5.What can the cartel members do to enforce the cartel agreement? Propose almethod. Describe the methodusing words. DO NOT do any calculations. DỘ NOT draw any graphs.

An oligopoly is a structure of the market that is being characterized by a few suppliers who are in…

Answered: 4. Discuss why it is hard to enforce a…

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4. Discuss why it is hard to enforce a cartel. Explain using words. DO NOT do any calculations. DO NOT draw any graphs.

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 20SQ

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Additional Problem 3: Assume two companies (C and D) are Cournot duopolists that produce identical products. Demand for the products is given by the following linear demand function: ? = 600 − ?C − ?D where ?C and ?D are the quantities sold by the respective firms and P is the price. Total cost functions for the two companies are ??C= 25,000 +100?C 2 ??D = 20,000 + 125?D c. Determine the equilibrium price and quantities sold by each firm. d.Determine the profits for the market as well as eachfirm.
Consider a market for crude oil production. There are two firms in the market. The marginal cost of firm 1 is 20, while that of firm 2 is 20. The marginal cost is assumed to be constant. The inverse demand for crude oil is P(Q)=200-Q, where Q is the total production in the market. These two firms are engaging in Cournot competition. Find the production quantity of firm 1 in Nash equilibrium. If necessary, round off two decimal places and answer up to one decimal place.
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