A 5-member commodity cartel faces the demand curve: P = 60 - 0.4Q. Each member can produce output at (constant) LAC = LMC = $20 per unit. How much profit does each member make?
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- A 5-member commodity cartel faces the demand curve: P = 60 – .4Q. Each member can produce output at (constant) AC = MC = $20 per unit. How much profit does each member make?Consider an industry with two firms, each having marginal costs and total costs equal to zero. The industry demand is P = 100 − Q where Q = Q1 + Q2 is total output. 1. Find the cartel output and cartel profits assuming that the firms share the profit equally. In cartels, firms behave as if they are a monopoly. Hence, the cartel quantity is at the point where MR = MC. After finding the quantity, use the demand curve to find the cartel price. And then calculate Π = T R − T C. Divide the total profit by 2 to find each firm's profit. 2. If each firm behaves as a Cournot competitor, what is firm 1's optimal output given firm 2's output? This part is asking the best response function of firm 1. Solve firm 1's profit maximizatin problem by setting its MC = MR. Then, express Q1 as a function of Q2. 3. Calculate the Cournot equilibrium output and profit for each firm. You have already solved firm 1's problem above. Now solve firm 2's problem. Then, solve BR functions simultaneously to get…Consider an industry with two firms, each having marginal costs and total costs equal to zero. The industry demand is P = 100 − Q where Q = Q1 + Q2 is total output. 1. Find the cartel output and cartel profits assuming that the firms share the profit equally. Hint: In cartels, firms behave as if they are a monopoly. Hence, the cartel quantity is at the point where MR = MC. After finding the quantity, use the demand curve to find the cartel price. And then calculate Π = T R − T C. Divide the total profit by 2 to find each firm’s profit. 2. If each firm behaves as a Cournot competitor, what is firm 1’s optimal output given firm 2’s output? Hint: This part is asking the best response function of firm 1. Solve firm 1’s profit maximizatin problem by setting its MC = MR. Then, express Q1 as a function of Q2. 3. Calculate the Cournot equilibrium output and profit for each firm. Hint: You have already solved firm 1’s problem above. Now solve firm 2’s problem. Then, solve BR functions…
- Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output) (a) Does joining a cartel offer any benefits to both farmers? Justify your answerConsider an industry with 4 firms with the same total cost function TC(q) = 20q. The demand function is p= 260 − 2Q. (a) Solve for Cournot equilibrium: how much each firm produces in equilibrium? What is an equilibrium price and profits? (b) What will be the profit of each firm if all the firms join the cartel? (c) If one of the firms wants to deviate from the cartel agreement, what output should it set? Calculate the profit of the cheating firm.OPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?
- Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output) a. Suppose that both farmers decide to form a cartel, determine profits for each farmer under the cartelWhat is the objective of a cartel? Question 7 options: joint profit maximization productive efficiency allocative efficiency individual profit maximizationTwo dairy farmers produce milk for a local town with local milk demand given by Q =100-0.3333333333P(P denotes price measured in Rands, Q denotes the quantity measured in liters). Both farmers have the same cost function given by TC= 150+ 2Q(wheredenotes output). (a) Does joining a cartel offer any benefits to both farmers? Justify your answer
- Evaluate the following statement: "A cartel will put an end to price wars, which is a barbaric form of competition that benefits no one."Consider a market with 4 firms. If all 4 firms enter into a cartel arrangement, then the demand curve facing the cartel is: a. identical to the monopolist's demand curve b.. perfectly elastic c. perfectly inelastic d. the marginal revenue curveTwo farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output) a. Calculate the profit if farmer 2 decides to break the cartel agreement
