Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firmSuppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.)Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together.NOTE:fill in the blanks as well Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can ofbeer is constant and equals $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for eachfirm.Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this modelrequires that the two companies must equally share the output.)Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays andMcCovey choose to work together.2001.80Monopoly Outcome1.00Demand1,401.201.00MC = ATC0.800.600.400.20MR4080120160200240280320360400QUANTITY (Cans of beer)PRICE (Dollars per can) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays andMcCovey choose to work together.2.001.80Monopoly Outcome1.60Demand1.401.201.00MC = ATC0.800.600.400.20MR+40120160200240280320360400QUANTITY (Cans of beer)When they act as a profit-maximizing cartel, each company will produce|cans and charge S, so the daily total industry profit in the beer market is sper can. Given thisinformation, each firm earns a daily profit of sOligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume thetwo companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under thecollusive agreement.Mays's deviation from the collusive agreement causes the price of a can of beer towhile McCovey's profit is now Stoper can. Mays's profit is nowTherefore, you can conclude that total industry profitwhenMays increases its output beyond the collusive quantity.PRICE (Dollars per can)

The monopoly's increasing possibility are going to be to provide at the number wherever marginal…

Answered: Mays and McCovey are beer-brewing…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter10: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 16SQ

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Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm

Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.)

Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together.

NOTE:

fill in the blanks as well

Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of
beer is constant and equals $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each
firm.
Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model
requires that the two companies must equally share the output.)
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and
McCovey choose to work together.
200
1.80
Monopoly Outcome
1.00
Demand
1,40
1.20
1.00
MC = ATC
0.80
0.60
0.40
0.20
MR
40
80
120
160
200
240
280
320
360
400
QUANTITY (Cans of beer)
PRICE (Dollars per can)

Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and
McCovey choose to work together.
2.00
1.80
Monopoly Outcome
1.60
Demand
1.40
1.20
1.00
MC = ATC
0.80
0.60
0.40
0.20
MR
+
40
120
160
200
240
280
320
360
400
QUANTITY (Cans of beer)
When they act as a profit-maximizing cartel, each company will produce
|cans and charge S
, so the daily total industry profit in the beer market is s
per can. Given this
information, each firm earns a daily profit of s
Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the
two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.
Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the
collusive agreement.
Mays's deviation from the collusive agreement causes the price of a can of beer to
while McCovey's profit is now S
to
per can. Mays's profit is now
Therefore, you can conclude that total industry profit
when
Mays increases its output beyond the collusive quantity.
PRICE (Dollars per can)

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