ECON.TODAY (COMPLETE)-TEXT ONLY
18th Edition
ISBN: 9780133920161
Author: Miller
Publisher: PEARSON
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Chapter 26, Problem cFCT
To determine
Reason for difficulty in colluding again after cheating.
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Students have asked these similar questions
Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization?
Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?
Why are cartel agreements often not successful?
Different firms experience different costs.
All parties would make more money if everyone increased production.
One party has an incentive to cheat to make more profit?
Chapter 26 Solutions
ECON.TODAY (COMPLETE)-TEXT ONLY
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Similar questions
- What is a cartel? Explain the coordination problem it faces.arrow_forwardIn the United States cartels arearrow_forwardassuming that you own one of three gas stations in a little town and you and the other gas station owners decide you want to "help each other out" so everyone can make more money." What arrangements could you make so that all three owners make more money? Would these arrangements make the three gas stations a cartel?arrow_forward
- Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product?arrow_forwardIs it possible that the violent members of the drug cartels can behave like cartels in legitimate markets?arrow_forwardWhich of the following would be cases of cartels? Check All That Apply Ford Motor Company OPEC Major League Baseball Major League Baseball The restaurant industry DeBeers Microsoftarrow_forward
- Breakdown of a cartel agreementarrow_forwardWhy is collusion or coordination (such as cartels) not prevalent in the United States and other developed countries?arrow_forwardIn order to be successful, a cartel must find a way to encourage members to produce more than they would otherwise produce. agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. agree on the total level of production and on the amount produced by each member. agree on the prices charged by each member, but they need not agree on amounts produced.arrow_forward
- Describe how drug cartels are able to recruit new members when their members are murdered.arrow_forwardA certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium? Jimmy and Bob will each earn a daily profit of $625. Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500. Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500. Jimmy and Bob will each earn a daily profit of $525.arrow_forwardThe demand for a product is Q = 100 P. Initially the marginal cost is MC0 = 40 and the price is P0 = 40. (a) What is the total surplus and If a cartel forms, the price rises to P1 = 70, and the marginal cost stays the same at MC1 = 40. What is the total surplus with a cartel? (b) If a merger happens, the price would become P2 = 70 and the marginal cost would become MC2 = 30. What is the total surplus after the merger? (c) Consider again the merger. Keeping all the others parameters fifixed, for what values of P2 should the merger be allowed? (Your can say something like “the merger should be allowed if P2 is more than 50”, or “the merger should be allowed if P2 is less than 50”.)arrow_forward
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