argell and Schmidt are brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is instant and equals $0.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. uppose that Stargell and Schmidt form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model quires that the two companies must equally share the output.) ace the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and chmidt choose to work together. PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 + 0 0 20 40 60 MR 80 100 120 140 160 QUANTITY (Cans of beer) MC ATC 180 200 Monopoly Outcome hen they act as a profit-maximizing cartel, each company will produce [ formation, each firm earns a daily profit of S cans and charge S , so the daily total industry profit in the beer market is S ? argell's deviation from the collusive agreement causes the price of a can of beer to per can. Given this igopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the to companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. ow, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under e collusive agreement. per can, Stargell's profit is
argell and Schmidt are brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is instant and equals $0.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. uppose that Stargell and Schmidt form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model quires that the two companies must equally share the output.) ace the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and chmidt choose to work together. PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 + 0 0 20 40 60 MR 80 100 120 140 160 QUANTITY (Cans of beer) MC ATC 180 200 Monopoly Outcome hen they act as a profit-maximizing cartel, each company will produce [ formation, each firm earns a daily profit of S cans and charge S , so the daily total industry profit in the beer market is S ? argell's deviation from the collusive agreement causes the price of a can of beer to per can. Given this igopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the to companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. ow, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under e collusive agreement. per can, Stargell's profit is
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 3E
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