One factor that has prevented the formation of cartels for producers of commodities is that: a) Commodity produces have been able to dominate world markets. b)Production of most commodities is capital intensive. c) The demand for commodities tends to be price inelastic d)Substitute products exist forany commodities

One factor that has prevented the formation of cartels for producers of commodities is that: a) Commodity produces have been able to dominate world markets. b)Production of most commodities is capital intensive. c) The demand for commodities tends to be price inelastic d)Substitute products exist forany commodities

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter11: Monopolistic Competition, Oligopoly, And Game Theory

Section: Chapter Questions

Problem 4WNG

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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…
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…
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