Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 10, Problem 16SQ
To determine
The equilibrium in the market with a cartel.
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The table above presents the demand schedule and profits for soft drinks. Suppose the market for soft drinks is a duopoly and the two firms in the market are Coca Cola and Pepsi. Assume Coca Cola and Pepsi make exactly the same soft drinks but with different names: Coke and Pepsi. Assume a constant marginal cost of $200 and no fixed costs. If Coca Cola and Pepsi collude, how many Cokes would Coca Cola produce?
[11:52]
100
25
150
75
In your experience and observation of the general market, can you identify two companies locally or nationally you can associate with any of these market structures (Perfect competition market structure, monopoly market structure, monopolistic-competition market structure, oligopoly market structure)?
not copy paste
The table shows the demand schedule for a particular product.
Quantity
Price
0
100
300
90
600
80
900
70
1200
60
1500
50
1800
40
2100
30
2400
20
2700
10
3000
0
Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?
a. $40 b. $50 c. $60 d. $70 e. $80
Chapter 10 Solutions
Economics For Today
Ch. 10.1 - Prob. 1YTECh. 10.5 - Prob. 1GECh. 10.6 - Prob. 1YTECh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQP
Ch. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 12SQPCh. 10 - Prob. 13SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - An oligopoly is a market structure in which a. one...Ch. 10 - Prob. 11SQCh. 10 - Prob. 12SQCh. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - Prob. 20SQ
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The opioid epidemic causing a staggering number of deaths each year in the United States is largely caused by two drugs: heroin and fentanyl. Much of the heroin is supplied by several major organized Mexican cartels while the much stronger fentanyl is mostly produced in hundreds of labs (big and small) in China. The market structure for heroin can be considered as an oligopoly that operates as a monopoly. On the other hand, the fentanyl industry is less organized in terms of cartel organization and therefore more competitive.
How do the differences in the organization of both industries explain why deaths from fentanyl have skyrocketed in recent years?
The organized heroin cartel
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B.has the ability to control quantity and raise the prices. The more competitive fentanyl industry makes more of the drug available at a lower…
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Cartel theory is usually understood as the doctrine of economic cartels. However, since the concept of 'cartel' does not have to be limited to the field of the economy, doctrines on non-economic cartels are conceivable in principle.
Explain the cartel theory using an appropriate graph. Indicate the incentive for the oligopoly firms to form a cartel.
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Question 6
(a) Why is Perfect Competition considered to display high level of economic efficiency?
(b) How does monopoly result in a dead-weight loss? Illustrate with diagram.
(a) How is oligopoly different from monopolistic competition?
(b) Illustrate and explain how the oligopolistic firms determines their collective profit by maximizing price and output levels when they collude and act like a cartel (monopoly).
Question 7
(a) What are the main causes of market failure? Give one example and illustrate using a diagram.
(b) Explain the difference between private costs and social costs.
(c) Government of Country X is considering implementing a tax on fizzy drinks. Using a demand and supply diagram, illustrate what effect the tax will have on the market of fizzy drinks.
(d) For what purposes does government use taxes-both at micro and macroeconomic level?
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Firms like Papa John’s, Domino’s, and Pizza Hut sell pizza and other products that aredifferentiated in nature. While numerous pizza chains exist in most locations, thedifferentiated nature of these firms’ products permits them to charge prices abovemarginal cost. Given these observations, is the pizza industry most likely a monopoly,perfectly competitive, monopolistically competitive, or an oligopoly industry? Use thecausal view of structure, conduct, and performance to explain the role of differentiationin the market for pizza. Then apply the feedback critique to the role of differentiation inthe industry.
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compare monopoly market structure profit scenerio with oligopoly market structure profit scenerio which is enjoyed after cartel formation by drawing their separate diagrams and explain in words in what conditions they enjoy profit?
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Discuss the possible deviations from perfect competition and then focus on oligopolies. How can cartels coordinate to affect markets? What affects antitrust enforcers’ ability to detect cartels? Discuss with reference to one or more examples.
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Compare the welfare of producers, consumers, and society as awhole in an oligopoly to monopoly and perfect competition.
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Consider the curve shown in the figure below, which shows the market demand, marginal cost, and marginal revenue curve for firms in an oligopolistic industry. (MC curve is horizontal because it is assumed that the fixed costs are 0 for all firms and the AVC is constant, so ATC=AVC=MC.)
Suppose the firms collude to form a cartel. What price will the cartel charge? What quantity will the cartel supply? How much profit will the cartel earn?
Suppose now that the cartel breaks up and the oligopolistic firms compete as vigorously as possible by cutting the price and increasing sales. What will the industry quantity and price be? What will the collective profits be of all firms in the industry?
Compare the equilibrium price, quantity, and profit for the cartel and cutthroat competition outcomes.
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ASAP
Bertrand competition with differentiated goods. Firms 1,2 with demand functions Q1 = 10 – 3P1 + 2P2 , Q2 = 10 – 3P2 + 2P1 and marginal costs C1 = 6, C2 = 4. i) Find the Nash Equilibrium prices, quantities and individual profits. ii) The firms agree to form a cartel. Find the prices, quantities, cartel profits and individual profits under the cartel agreement. iii) Which firm has a reason to suggest the cartel, and is the cartel sustainable or not? Depict and explain the cartel game in an appropriate way. If it is sustainable, explain. If no, explain and suggest a mechanism that can make it sustainable a) if the deal is for one period only b) if the deal is renewed each period over 5 periods.
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Based on the demand schedule, at what quantity should the firms under duopoly and collusion will agree to produce? Explain.
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Give some examples of fixed costs and variable costs. Why do average fixed costs decline across a range of increasing production? Do average variable cost decline, increase, or do both as production increases? Explain. Tell me about perfect competition. Why is it that perfect competition is more of a theoretical market structure than a practical one? In addition, please explain the most important characteristic in perfect competition, monopolistic competition, oligopoly, and monopolies and relate the characteristic to how these firms can make profits in the short run. In your analysis, make sure to relate an example for each of the market structures listed and how it relates to the particular characteristics.
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a. Explain what you know about collusion and cartels, including: definition, formation of motives, types and differences between these types, and so on.
b. Why is this behavior often encountered in imperfectly competitive market structures such as oligopolies?
c. What obstacles/obstacles do collusion and cartels often face?
d. Name and explain at least 3 factors that can facilitate the occurrence of collusion and cartel!
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