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. PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10+ MC = ATC MR 0 + 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Thousands of cans of beer) Monopoly Outcome (?) When they act as a profit-maximizing cartel, each company will produce information, each firm earns a daily profit of $ cans and charge $ , so the daily total industry profit in the beer market is $ per can. Given this Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the collusive agreement. Mays's deviation from the collusive agreement causes the price of a can of beer to , while McCovey's profit is now $ Mays increases its output beyond the collusive quantity. to per can. Mays's profit is now Therefore, you can conclude that total industry profit when
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. PRICE (Dollars per can) 1.00 Demand 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10+ MC = ATC MR 0 + 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Thousands of cans of beer) Monopoly Outcome (?) When they act as a profit-maximizing cartel, each company will produce information, each firm earns a daily profit of $ cans and charge $ , so the daily total industry profit in the beer market is $ per can. Given this Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the collusive agreement. Mays's deviation from the collusive agreement causes the price of a can of beer to , while McCovey's profit is now $ Mays increases its output beyond the collusive quantity. to per can. Mays's profit is now Therefore, you can conclude that total industry profit when
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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.
PRICE (Dollars per can)
1.00 Demand
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
MC = ATC|
MR
0
0
30
60
90 120 150 180 210 240
270 300
QUANTITY (Thousands of cans of beer)
When they act as a profit-maximizing cartel, each company will produce
information, each firm earns a daily profit of $
+
Monopoly Outcome
(?)
cans and charge $
, so the daily total industry profit in the beer market is $
per can. Given this
Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the
two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.
Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the
collusive agreement.
Mays's deviation from the collusive agreement causes the price of a can of beer to
$
,while McCovey's profit is now $
Mays increases its output beyond the collusive quantity.
to $
Therefore, you can conclude that total industry profit
per can. Mays's profit is now
when
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