Other things being equal, cartels and similar collusive arrangements are easier to establish and maintain: Multiple Choice during periods of cyclical stability and full employment. when the demand and cost conditions of the participating firms differ substantially. when there are ample opportunities for the firms to make secret price concessions to selected buyers. when the number of firms is relatively large.

Other things being equal, cartels and similar collusive arrangements are easier to establish and maintain: Multiple Choice during periods of cyclical stability and full employment. when the demand and cost conditions of the participating firms differ substantially. when there are ample opportunities for the firms to make secret price concessions to selected buyers. when the number of firms is relatively large.

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 13SQ

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In cases where a cartel controls access to a key production input, firms in the cartel: have less incentive to cheat for fear that they will be cut off from the key input. will always have an incentive to cheat on the agreement, as cheating increases profits. are typically good at finding ways to access the key input outside the cartel. will never cheat on the cartel agreement.
A group of firms explicitly colluding to make price and output decisions is called a ) price leadership. b ) a cartel. c ) a concentrated industry. d ) an oligopoly.
When tacit collusion breaks down and prices collapse, the result is: a price war. formation of a cartel. price leadership. higher profits for the industry as a whole.
When deciding on output levels, members of a cartel set their output where MR = MC. produce the same level of output as if they were in a competitive market. take into account the impact of changes on members' profits. act as if they were monopolies.
Suppose that a price-taker firm has a marginal cost function given by: MC= 20+0.2q. The firm could join a cartel in its industry and agree to a quota of 10 units. The collusion drives the price of the good from $24.55 to $50.00. Suppose that if the firm cheats on the cartel, it has no effect on the price. Calculate the producer surplus of this firm when they cheat on the cartel.
Cartels are the group that is created by the firms in the market to gain control over the prices and the entire goods market.
Monopoly. A monopoly is the least competitive market structure. It has only one seller. There are no substitutes to a truly monopolized good, so the firm can be a price searcher (or price seeker). The firm can produce and sell its product in the sole interest of profit maxímization. A monopoly can develop for a number of reasons. A natural monopoly results when it seems impractical for multiple firms to control a single resource, as is often the case with public utilities, such as electricity. Also, if a firm captures economies of scale, it can prevent other firms from being able to produce at a cost that would allow them to be competitive. A firm that holds a copyright or a patent has an artificial monopoly. Monopolies can be problematic. One reason is that the product scarcity is partially contrived. A firm can withhold resources from consumers in order to earn a higher price. A second reason is welfare loss, or "deadweight loss." When a firm withholds goods, it eventually sells…
A collusive equilibrium at the monopoly price
True/False Monopoly market can be created due to the cartel.
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. 1. Find the cartel output and cartel profits assuming that the firms share the profit equally. Hint: In cartels, firms behave as if they are a monopoly. Hence, the cartel quantity is at the point where MR = MC. After finding the quantity, use the demand curve to find the cartel price. And then calculate Π = T R − T C. Divide the total profit by 2 to find each firm’s profit. 2. If each firm behaves as a Cournot competitor, what is firm 1’s optimal output given firm 2’s output? Hint: This part is asking the best response function of firm 1. Solve firm 1’s profit maximizatin problem by setting its MC = MR. Then, express Q1 as a function of Q2. 3. Calculate the Cournot equilibrium output and profit for each firm. Hint: You have already solved firm 1’s problem above. Now solve firm 2’s problem. Then, solve BR functions…
Name a firm of business that is selling a good or item that is not so unique. However, in the local market, it's able to enjoy monopoly power. Although it's a monopoly, you don't see other firms entering the market. Name one possible entry barrier that could be keeping other firms from entering and competing with the suggested business.
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. 1. Find the cartel output and cartel profits assuming that the firms share the profit equally. In cartels, firms behave as if they are a monopoly. Hence, the cartel quantity is at the point where MR = MC. After finding the quantity, use the demand curve to find the cartel price. And then calculate Π = T R − T C. Divide the total profit by 2 to find each firm's profit. 2. If each firm behaves as a Cournot competitor, what is firm 1's optimal output given firm 2's output? This part is asking the best response function of firm 1. Solve firm 1's profit maximizatin problem by setting its MC = MR. Then, express Q1 as a function of Q2. 3. Calculate the Cournot equilibrium output and profit for each firm. You have already solved firm 1's problem above. Now solve firm 2's problem. Then, solve BR functions simultaneously to get…