Assume the management of two large firms selling canned vegetables hold a secret meeting to create a collusive cartel. Which will most likely be the outcome of that meeting, assuming both companies engage in the collusion? soda output will fall and market prices will fall market price will remain unchanged and total output will fall soda output will fall and market prices will rise soda output will rise and market prices will fall soda output will rise and market prices will rise

Assume the management of two large firms selling canned vegetables hold a secret meeting to create a collusive cartel. Which will most likely be the outcome of that meeting, assuming both companies engage in the collusion? soda output will fall and market prices will fall market price will remain unchanged and total output will fall soda output will fall and market prices will rise soda output will rise and market prices will fall soda output will rise and market prices will rise

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 16SQ

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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 $0 300 __________million pounds
In the United States cartels are
The table shows a hypothetical demand schedule for monosodium glutamate (MSG). Ajinomoto holds 5050% of the market, Jiali holds 3030% of the market, and Quingdao holds 2020% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. What quantity maximizes the cartel's profit? Price of MSG ($ 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.…
OPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?
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?
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
Which of the following methods could a cartel NOT use to prevent its member fırms from breaking their agreements? If a member fırm breaks its agreement, it is a breach of contract and the firm is subject to legal penalties. The cartel acts as a monopolist, maximizing the combined profits of all the member firms. All of the other choices could be used to prevent member firms from breaking agreements. The cartel requires member firms to structure executive pay in such a way that the executives benefit personally from preserving the cartel. If a member firm breaks its agreement, that firm is kicked out of the cartel permanently and can no longer earn cartel profits in the future.
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…
How would cartel decide optimal pricing and output
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?
Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €6 for each firm. Price is determined by the following demand curve: P = 30 – Q where Q = Q1 + Q2. Suppose the two firms combine together and form a cartel. The output produced by each firm in the cartel is (assuming that they split the cartel output equally between them) A. 6 B. 12 C. 8 D. 4 Two identical firms compete in a market to sell a homogenous good with the following inverse demand function: P = 600 – 3Q. Each firm produces at a constant marginal cost of €300 and there are no fixed costs. The price that each firm in the Cournot equilibrium will charge is A. 400 B. 500 C. 300 D. 450
Gotcha, the only seller of stun guns, faces the inverse market demand curve, P = 400 - 120, where Q measures the number of 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 and evenly split the market output. Gotcha holds to the agreement, but Ouchy decides to produce 5 more stun guns than its level under the cartel agreement. In this case, the market price is $. 172 192 232 205

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	soda output will fall and market prices will fall
	market price will remain unchanged and total output will fall
	soda output will fall and market prices will rise
	soda output will rise and market prices will fall
	soda output will rise and market prices will rise