All of the following statements, except one, are correct concerning the cartel variant of oligopoly theory. Which is the exception? O a b Ос d e An effective cartel restricts the supply of the product being sold. The individual members of the cartel must agree to and respect quotas on their output. The primary threat to the success of a cartel is government regulation. The output and the price of the cartel is often similar to that of a monopoly. The government is a part of the cartel.

“Firms have an incentive to form a cartel,but once it is formed,they have anincentive to cheat”Explain the incentives‘to form the cartel’,and‘to cheat after forming the cartel’.

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Demand and cost conditions for the Chewing Gum Industry $4 MC .40 .35 .31 3.30 ATC D .25 MR Q Packs of chewing gum in thousands 12 14 16 Figure 14.1 Refer to Figure 14.1. Six firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. To maximize profits, the cartel should produce packs of chewing gum and the price should be O a. 14,000; $.30 O b. 12,000; $.40 O c. 16,000; $.35 O d. 12,000; $.25 Dollars.

Some monopolies are regulated by setting a price that a monopolist cannot exceed over a specified period of time. This is called: O antitrust laws O cost-plus regulation O price cap regulation O regulatory capture

Coke and Pepsi dominate the cola market. Suppose that the marginal cost of making cola is $2. Assume also that the demand for cola is given by the following table: Price $8 7 6 5 4 3 2 1 Quantity 5 cans 6 7 8 9 10 11 12 Suppose Coke and Pepsi both supply cola. They form a cartel and agree to cooperate on how much soda to produce. In this cartel case, how many bottles of cola would be sold? Type your answer...

17. Demand is given by Q = 220 P. Marginal cost is $120. Calculate the market equilibrium price, output, and any profits for: a. b. C. a monopoly context ? a Bertrand duopoly a Cournot duopoly

Econ 1

7. Suppose that the inverse market demand for pumpkins is given by P = $10-0.050. Pumpkins can be grown by any- one at a constant marginal cost of $1. ena. If there are lots of pumpkin growers in town so that the pumpkin industry is competitive, how many pumpkins will be sold, and what price will they sell for? b. Suppose that a freak weather event wipes out the pumpkins of all but two producers, Linus and Lucy. Mesob 0 17050

4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60. a. If the firms stick to their agreement (cooperate), how much per-period profit do they each make? b. If they are not able to maintain their agreement (compete), what is their per-period profit? c. If one firm cheats on their agreement (deviate), how much does each firm make? Be sure to specify both the profit for the cheater and the firm cheated-on. d. Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel…

Consider a market with 4 firms. If all 4 firms enter into a cartel arrangement, then the demand curve facing the cartel is:  a. identical to the monopolist's demand curve b.. perfectly elastic c. perfectly inelastic d. the marginal revenue curve