A Cournot Oligopoly (duopoly) exists where the market demand function facing each of the two firms is P = 4 - (Q1 + Q2) , where Q = (Q1 + Q2) and the MC facing each firm is zero. If the two firms form a cartel, what is the market quantity (Q) and market price (P) that will prevail?

Suppose that all firms in an industry collude to reduce output, which raises the product price to $7.86 and requires the perfectly competitive firm in the figure to the right to reduce its output from 500 units to 200 units. What is the total dollar amount of this typical perfectly competitive firm's economic incentive to join the proposed cartel, assuming that after the fact, no firms cheat on the specified cartel agreement? Explain your reasoning. In the absense of collusion among the firms, the typical perfectly competitive firm's economic profits are average total cost. because price Using the rectangle drawing tool, show the amount of economic profits for the typical perfectly competitive firm if it joins the cartel Label this area 'Profits." Carefully follow the instructions above, and only draw the required object If ATC $5.33 at the reduced output of 200 units, then the typical firm's economic incentive to participate in the cartel is $(Enter your response as a whole number.)…

If Gulfstream and Bombardier, both producers of upscale jet airplanes, were to collude rather than compete, consumers could expect: Group of answer choices A) higher prices and higher quantities offered for sale. B) higher prices and lower quantities offered for sale. C) one firm to emerge as the price leader in the oligopoly. D) lower prices and lower quantities offered for sale. E) each firm to cheat on the cartel agreement.

2. 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 $0.80 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. 2.00 1.80 Monopoly Outcome 1.60 Demand 1.40 1.20 1.00 MC = ATC 0.80 0.60 0.40 0.20 MR 40 80 120 160 200 240 280 320 360 400 QUANTITY (Cans of beer) PRICE (Dollars per can)

2. 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 $0.20 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. (Dollars per can) PRICE 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0 0 Demand MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome (2)

Suppose the demand for a product is P = 150-Q and that the marginal cost of producing the product is $30. If two firms were initially competing in a Cournot oligopoly and then try to collude to maximize joint profits, what is the profit that firm 1 would actually get, given its best response function, assuming that firm 2 is producing the colluding quantity? (Hint: think about the "cheating" outcome)

Consider a duopolistic market with an inverse demand curve  P(Q) = 460 − 4Qand constant marginal costs for each firm that are given by  MC(Q) = 10.Assume fixed costs are negligible. The two identical firms are competing in this market by choosing their production quantities simultaneously. In the​ equilibrium, each firm produces 37.5 units and the prevailing market price is 160.   How would the joint profits of these two firms change if they successfully formed a​ cartel?   Change in joint​ profits: ?  ​(Enter your answer rounded to two decimal​ places; include a negative sign if ​appropriate.)

Outline the characteristics of an oligopoly and explain why firms in this particular market structure face a choice between competition and collusion.

In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be set: at the monopoly price above MC at MC below MC

Which of the features of an oligopoly market most directly creates the potential for long-run profits? Cartels Interdependent pricing Homogeneous products Barriers to entry Collusion