The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 5050% of the market, Jiali holds 3030% of the market, and Quingdao holds 2020% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit? Price of MSG ($ per pound) Quantity of MSG demanded (millions of pounds) $8$8 00 $7$7 2020 $6$6 3030 $5$5 4040 $4$4 6060 $3$3 9090 $2$2 110110 $1$1 180180 $0$0 300300 million pounds million pounds Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinomoto to act noncooperatively and change its output? Ajinomoto will not have an incentive to change its output. Ajinomoto will have an incentive to increase its output of MSG. Ajinomoto will have an incentive to decrease its output of MSG.
The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 5050% of the market, Jiali holds 3030% of the market, and Quingdao holds 2020% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit? Price of MSG ($ per pound) Quantity of MSG demanded (millions of pounds) $8$8 00 $7$7 2020 $6$6 3030 $5$5 4040 $4$4 6060 $3$3 9090 $2$2 110110 $1$1 180180 $0$0 300300 million pounds million pounds Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinomoto to act noncooperatively and change its output? Ajinomoto will not have an incentive to change its output. Ajinomoto will have an incentive to increase its output of MSG. Ajinomoto will have an incentive to decrease its output of MSG.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter10: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 13SQ
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The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 5050% of the market, Jiali holds 3030% of the market, and Quingdao holds 2020% of the market.
Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit?
| Price of MSG ($ per pound) | Quantity of MSG demanded (millions of pounds) |
|---|---|
| $8$8 | 00 |
| $7$7 | 2020 |
| $6$6 | 3030 |
| $5$5 | 4040 |
| $4$4 | 6060 |
| $3$3 | 9090 |
| $2$2 | 110110 |
| $1$1 | 180180 |
| $0$0 | 300300 |
million pounds million pounds
Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinomoto to act noncooperatively and change its output?
Ajinomoto will not have an incentive to change its output.
Ajinomoto will have an incentive to increase its output of MSG.
Ajinomoto will have an incentive to decrease its output of MSG.
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