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? $

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? $

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter10: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 16SQ

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. Deviating from the collusive outcome Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.60 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.)
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Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $1.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. PRICE (Dollars per can) 2.00 1.80 1.60 1.20 1.00 0.80 0.60 0.40 + 0.20 + 0 Demand 0 40 80 MR MC ATC 160 200 240 250 320 360 400 QUANTITY (Cans of beer) Monopoly Outcome
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