coordinate their be A collusion agreement that requires firms to have some sort of communication in which they coordinate their behaviour. Organization of Petroleum Exporting countries is an example of this type of market behaviour. Competitors in an industry 1. Explicit cartel 2. Implicit cartel 3. Horizontal merger

Part G H I

consider the market for oil. Suppose for simplicity that there are only two oil roducing countries-Saudi Arabia and Kuwait. Both countries must choose hether to produce a low output or a high output. These output strategies with corresponding profits are depicted in the ayoff matrix to the right. Kuwait's profits are in red and Saudi Arabia's are in blue. Kuwait Suppose the two countries form a cartel. What is the cooperative equilibrium? Low Output High Output O A. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output. $125 $75 Low Output $8 $13 O B. A cooperative equilibrium does not exist for this game. O C. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output. Saudi Arabia $98 $70 O D. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output. High Output $5 $8 O E. The cooperative equilibrium is for Saudi Arabia to produce…

Isolated Island has two wind turbines producing electricity, one owned by Dick and the other owned by Harry. Quantity demanded (units per day) Price (dollars per unit) The marginal cost of producing electricity is $4 a unit. 12 11 1 The table gives the demand schedule for electricity in this area. 10 2 9 3 If Dick and Harry form a cartel and maximize their joint profit, what will be the price of electricity and the total quantity produced? 8 4 7 5 If Dick and Harry form a cartel and maximize their joint profit, the price of a unit of electricity is $ and the quantity produced is units a day. 6 7