2 Question 1In Ontario, the market for pop is controlled by Pepsi and Coke(we assume that consumers do not have preference for one overthe other). Each firm has a fixed cost of $100 million and aconstant marginal cost of $0.10 per litre of pop. The demand forpop is given in the following table.Price of a bottle of pop Quantity of bottles(S per litre)(millions of bottles)1.003001.202801.402601.602401.802202.002002.201802.401602.60140a) Suppose the two firms for a cartel and act as a monopolist.Find the optimal output for each firm if they split themarket equally. Find the profit for each.b) Now suppose Coke decides to increase production by 40million of bottles while Pepsi continues to produce thesame quantity. Find the new market price, the quantitiesproduced by each firm and their profits.e) What do your results tell you about the likelihood ofcollusion between them?

A monopolist maximizes its profits at the selling point where marginal revenue equals marginal cost…

Question 1 In Ontario, the market for pop is controlled by Pepsi and Coke (we assume that consumers do not have preference for one over the other). Each firm has a fixed cost of $100 million and a constant marginal cost of S0.10 per litre of pop. The demand for pop is given in the following table. Price of a bottle of pop Quantity of bottles (S per litre) (millions of bottles)

Question 1 In Ontario, the market for pop is controlled by Pepsi and Coke (we assume that consumers do not have preference for one over the other). Each firm has a fixed cost of $100 million and a constant marginal cost of S0.10 per litre of pop. The demand for pop is given in the following table. Price of a bottle of pop Quantity of bottles (S per litre) (millions of bottles)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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