Suppose that a price-taker firm has a marginal cost function given by: MC= 20+0.2q. The firm could join a cartel in its industry and agree to a quota of 10 units. The collusion drives the price of the good from $24.55 to $50.00. Suppose that if the firm cheats on the cartel, it has no effect on the price. Calculate the producer surplus of this firm when they cheat on the cartel.

Suppose that a price-taker firm has a marginal cost function given by: MC= 20+0.2q. The firm could join a cartel in its industry and agree to a quota of 10 units. The collusion drives the price of the good from $24.55 to $50.00. Suppose that if the firm cheats on the cartel, it has no effect on the price. Calculate the producer surplus of this firm when they cheat on the cartel.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 11SQP

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Cartels are the group that is created by the firms in the market to gain control over the prices and the entire goods market.