Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 15, Problem 3P
To determine
To explain:
The chances of success of S-J cartel if both farmers agree to limit their combined output of wheat for increasing the price and profits as well.
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Suppose Farmer Smith from Kansas and Farmer Jones from Missouri agree to restrict their combined output of wheat in an attempt to increase the price and profits. How likely do you think the Smith-Jones cartel is to suceed? Explain.
Suppose Farmer Smith from Kansas and Farmer Jones from Missouri agree to restrict their combined output of wheat in an attempt to increase the price and profits. How likely do you think the Smith–Jones cartel is to succeed? Explain.
The graph below shows the demand for Cosmic shampoo.
Suppose there are no fixed costs and marginal cost is a constant $80.a. What are the perfectly competitive price and output?
Price: $
Output:
b. What are the cartel (monopoly) price and output? Price: $
Output:
c. If there are only four firms in the cartel, what are the price and output of each firm, assuming equal shares? Round your answers to 1 decimal place. Price: $
Output:
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- Why has the Federation of Quebec Maple Syrup Producers been a successful cartel in Quebec, Canada? Has the relatively weak government structure of Quebec allowed for this organizations success?arrow_forwardImagine there are two companies, East Wafer and West Wafer, which produce silicon wafers, the base component in the microchips which constitute the brains of our computers. Below is the daily demand for silicon wafers Suppose, for simplicity, East Wafer and West Wafer have the same constant cost structure, so maximizing total revenue maximizes profit. If East Wafer and West Wafer are able to form a cartel and collude without cheating on each other, what will be the price of a silicon wafer? $40 $50 $60 $70arrow_forwardWhat is a cartel? Explain the coordination problem it faces.arrow_forward
- Consider a hypothetical demand schedule for monosodium glutamate (MSG). Suppose that Ajinomoto holds 50% of the market, Jiali holds 30% of the market, and Quingdao holds 20% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. Price of MSG ($ per pound) Quantity of MSG demanded (millions of pounds) $8 0 $7 20 $6 30 $5 40 $4 60 $3 90 $2 110 $1 180 $0 300 What quantity maximizes the cartel's profit? a.110 million pounds b.90 million pounds c.300 million pounds d.20 million pounds Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinimoto to act noncooperatively and change its output? a.Ajinomoto will have an incentive to increase its output of MSG. b.Ajinomoto will not have an incentive to change its…arrow_forwardThe table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 50% of the market, Jiali holds 30% of the market, and Quingdao holds 20% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit? Price of MSG ($ per pound) Quantity of MSG demanded (millions of pounds) $8 0 $7 20 $6 30 $5 40 $4 60 $3 90 $2 110 $1 180 $0 300 __________million poundsarrow_forwardOaksville has two tennis instructors, Sam and Jack. The figure shows the demand curve and marginal revenue for tennis lesson appointments and the average total cost. Would Sam and Jack have an incentive to break the cartel agreement and lower their price to increase the number of tennis lesson appointments? Explain.arrow_forward
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