profits equally among its 11 member firms. (i) Find the quantity produced by each cartel firm. (ii) What will be the price set by the cartel firm? (iii) Calculate the amount of profit that each cartel firm makes.

profits equally among its 11 member firms. (i) Find the quantity produced by each cartel firm. (ii) What will be the price set by the cartel firm? (iii) Calculate the amount of profit that each cartel firm makes.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 5E

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Question

(d)
An industry consists of eleven identical firms with each
firm's cost given as
c(q)
= 4q +q? . Market demand for the product is Q
100 - p
where
= firm's quantity, Q = market quantity and
p =
price of product.
All the eleven firms decide to form a cartel that will
operate as a monopoly
with total costs C(Q) = 4Q + Q²
and divide the
profits equally among its
11
member firms.
(i) Find the quantity produced by each cartel firm.
(ii) What will be the price set by the cartel firm?
(iii) Calculate the amount of profit that each cartel firm
makes.
(iv) If a member firm cheated, calculate this cheating
member firm's
quantity produced assuming that the other firms'
maintain their
agreed cartel price and output.

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