Gotcha, the only seller of stun guns, faces the inverse market demand curve, P = 400 - 120, where Q measures the numberof stun guns sold per day, and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy,enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel andevenly split the market output. Gotcha holds to the agreement, but Ouchy decides to produce 5 more stun guns than its levelunder the cartel agreement. In this case, the market price is $.172192232205

Step 1:To solve this problem, let's first determine the market output under the cartel agreement.The…

Answered: Gotcha, the only seller of stun guns,…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter24: Monopolistic Competition, Oligopoly, And Game Theory

Section: Chapter Questions

Problem 4WNG

See similar textbooks

Similar questions

Breakdown of a cartel agreement Consider a town in which only two residents, Darnell and Eleanor, own wells that produce water safe for drinking. Darnell and Eleanor can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. (base to table 1) Suppose Darnell and Eleanor form a cartel and behave as a monopolist. The profit-maximizing price is $_____ per gallon, and the total output is _____ gallons. As part of their cartel agreement, Darnell and Eleanor agree to split production equally. Therefore, Darnell's profit is $_______, and Eleanor's profit is $______. Suppose that Darnell and Eleanor have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Darnell says to himself, "Eleanor and I aren't the best of friends anyway. If I increase my production to 45 gallons more than…
Imagine 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 $70
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
Isolated Island has two natural gas wells, one owned by Tom and the other owned by Jerry. Each well has a valve that controls the rate of flow of gas. The marginal cost of producing gas is $12 a unit. The table gives the demand schedule for gas on this island If Tom and Jerry form a cartel and maximize their joint profit, what will be the price of gas and the total quantity produced? If Tom and Jerry form a cartel and maximize their joint profit, the price of a unit of gas is $ and the quantity produced is units a day Q Search Price (dollars per unit) 36 33 30 27 24 21 18 15 Quantity demanded (units per day) 0 1 2 3 4 5 6 7 Next
How would cartel decide optimal pricing and output
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$0 300300 million pounds million pounds Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinomoto to act noncooperatively and change its output? Ajinomoto will not have an incentive to change its output. Ajinomoto will have an incentive to increase its output of MSG.…
The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 50% of the market, Jiali holds 30% of the market, and Quingdao holds 20% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit? Price of MSG ($ 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 pounds
Seagate and Western Digital (WD) run a cartel producing identical 1 TB hard drives. The demand for hard drives is Q = 17 – P. They both have MC = 2 and no fixed cost so ATC = 2. This is a lot like the Coke-Pepsi game in the duopoly quantity_game video. You can verify that together the firms maximize their (combined) profit by each making 3.75 hard drives. What profit does Seagate make with this cartel agreement? $
Consider a duopolistic market with an inverse demand curve P(Q) = 460 − 4Qand constant marginal costs for each firm that are given by MC(Q) = 10.Assume fixed costs are negligible. The two identical firms are competing in this market by choosing their production quantities simultaneously. In the equilibrium, each firm produces 37.5 units and the prevailing market price is 160. How would the joint profits of these two firms change if they successfully formed a cartel? Change in joint profits: ? (Enter your answer rounded to two decimal places; include a negative sign if appropriate.)
Define cartel in the petroleum industry.
Consider an industry with two firms, each having marginal costs and total costs equal to zero. The industry demand is P = 100 − Q where Q = Q1 + Q2 is total output. 4. If the firms interact only once, is there a profitable deviation (cheating) from cartel for any firm? Find the profit of the firms in case of cheating. If a firm deviates from cartel (cheats) it will play its profit maximizing quantity, which is the quantity on its best response function. Now, use the best response function of firm 1 to find firm 1's cheating quantity, when firm 2 follows the rules of the cartel. Use the demand curve to find the new price level and then calculate profits. 5. Design a 2x2 normal form payoff matrix with strategies cartel and cheat. Complete the payoffs using the profits you calculated in the previous parts. Firm 2 Cartel Cheat Firm 1 Cartel Cheat 6. Now, assume that players interact twice. Hence the game is a twice repeated game. Is it possible to have (cartel,cartel) as an outcome?…
Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the short-run Phillips curve that is consistent with these expectations, assuming that it is parallel to SRPC₂- Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy. The inflation rate at point C is unemployment rate at point A. the inflation rate at point A, and the unemployment rate at point C is Was the central bank able to achieve its goal of lowering…

SEE MORE QUESTIONS

Recommended textbooks for you

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

Managerial Economics: Applications, Strategies an…

Economics

ISBN:

9781305506381

Author:

James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:

Cengage Learning

Survey Of Economics

Economics

ISBN:

9781337111522

Author:

Tucker, Irvin B.

Publisher:

Cengage,

Micro Economics For Today

Economics

ISBN:

9781337613064

Author:

Tucker, Irvin B.

Publisher:

Cengage,

SEE MORE TEXTBOOKS