In Fruitland, strawberries are sold in 4-litre baskets to customers on a "pick-your-own" basis. There are 2 farmers who sell strawberries: Mickey and Kit. There are no costs of supplying strawberries for sale for either farmer, so each has MC = ATC=0. Profit therefore is simply TR. Market demand for strawberries is given in the accompanying table. If the market were served by a monopolist, the quantity traded would be 125 baskets, the price per 4-litre basket would be $7.50, and the profit for the firm would be $937.50. If Mickey and Kit decided to collude, each would have an individual quantity supplied of 62.5 baskets and each would have profits of $468.75. Suppose Mickey and Kit agree to split the monopoly outcome. Kit, acting in her own self-interest, realizes that she can cheat and supply 87.5 baskets; when she does, Kit's profits are $525.00 and Mickey's profits are $375.00. Mickey decides to retaliate and increases his supply to 87.5 baskets too; when he does, Kit's profits are $393.75 and Mickey's profits are $393.75. Will either farmer cheat again and increase his or her output? Click the icon to view market demand for strawberries. Kit cheat again and Mickey cheat again, since Kit's profits if only Kit supplied 25 more baskets would be $ and Mickey's profits if only Mickey supplied 25 more baskets would be $ X Enter your answer in each of the answer boxes. Save for Later Market Demand for Strawberries P 11.75 11.00 10.00 8.50 7.50 6.00 4.50 3.00 Q 25 50 75 100 125 150 175 200 TR 293.75 550.00 750.00 850.00 937.50 900.00 787.50 600.00 D -
In Fruitland, strawberries are sold in 4-litre baskets to customers on a "pick-your-own" basis. There are 2 farmers who sell strawberries: Mickey and Kit. There are no costs of supplying strawberries for sale for either farmer, so each has MC = ATC=0. Profit therefore is simply TR. Market demand for strawberries is given in the accompanying table. If the market were served by a monopolist, the quantity traded would be 125 baskets, the price per 4-litre basket would be $7.50, and the profit for the firm would be $937.50. If Mickey and Kit decided to collude, each would have an individual quantity supplied of 62.5 baskets and each would have profits of $468.75. Suppose Mickey and Kit agree to split the monopoly outcome. Kit, acting in her own self-interest, realizes that she can cheat and supply 87.5 baskets; when she does, Kit's profits are $525.00 and Mickey's profits are $375.00. Mickey decides to retaliate and increases his supply to 87.5 baskets too; when he does, Kit's profits are $393.75 and Mickey's profits are $393.75. Will either farmer cheat again and increase his or her output? Click the icon to view market demand for strawberries. Kit cheat again and Mickey cheat again, since Kit's profits if only Kit supplied 25 more baskets would be $ and Mickey's profits if only Mickey supplied 25 more baskets would be $ X Enter your answer in each of the answer boxes. Save for Later Market Demand for Strawberries P 11.75 11.00 10.00 8.50 7.50 6.00 4.50 3.00 Q 25 50 75 100 125 150 175 200 TR 293.75 550.00 750.00 850.00 937.50 900.00 787.50 600.00 D -
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.3P
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Transcribed Image Text:In Fruitland, strawberries are sold in 4-litre baskets to customers on a "pick-your-own" basis. There are 2 farmers who sell strawberries: Mickey and Kit. There are no costs of supplying strawberries for sale for
either farmer, so each has MC = ATC = 0. Profit therefore is simply TR. Market demand for strawberries is given in the accompanying table. If the market were served by a monopolist, the quantity traded would
be 125 baskets, the price per 4-litre basket would be $7.50, and the profit for the firm would be $937.50. If Mickey and Kit decided to collude, each would have an individual quantity supplied of 62.5 baskets
and each would have profits of $468.75. Suppose Mickey and Kit agree to split the monopoly outcome. Kit, acting in her own self-interest, realizes that she can cheat and supply 87.5 baskets; when she does,
Kit's profits are $525.00 and Mickey's profits are $375.00. Mickey decides to retaliate and increases his supply to 87.5 baskets too; when he does, Kit's profits are $393.75 and Mickey's profits are $393.75. Will
either farmer cheat again and increase his or her output?
Kit
Click the icon to view market demand for strawberries.
cheat again and Mickey
cheat again, since Kit's profits if only Kit supplied 25 more baskets would be $ and Mickey's profits if only Mickey supplied 25 more baskets would be $
X
Enter your answer in each of the answer boxes.
Save for Later
Market Demand for Strawberries
P
11.75
11.00
10.00
8.50
7.50
6.00
4.50
3.00
Q
25
50
75
100
125
150
175
200
TR
293.75
550.00
750.00
850.00
937.50
900.00
787.50
600.00
D₁
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