Question

les L. JILLE . AY I Werdvures Dal Tuer. Ur import from another browser. Import favorites Learning Curve - Chapter 14: Oligopoly - 18 pts 11:59 PM EST NOW Back to Study Plan Score: 161/450 Question Value: 35 points The table shows the demand schedule and total revenue for textbook sales by University Bookstore and College Bookstore combined. Textbook Duopoly Quantity Price $36 Total revenue $0 120 210 Assume that the marginal cost of selling the books is zero. Suppose that the two stores agree to maximize industry profit and split that profitevenly. University Bookstore decides to cheat on the agreement and sell 10 books while College Bookstore sells 6. As a result College Bookstore will experience an: Need help on this question? Read the ebook page on this topic a hint Show answer Type here to search

the table shows the demand schedule and total revenue for text book sales by university bookstore and college bookstore combined.
assume that the marginal cost of selling the bookstore is zero. suppose the 2 stores agree to maximize industry profit and split that profit evenly. university bookstore decides to cheat on the agreement and sell 10 books while college bookstore sells 6. as a result college bookstore will experience...?

Answer 1

Both bookstores are colluding with each other to maximize profit and splitting it evenly.

Since, marginal cost of selling the textbooks is zero, total revenue is equal to total profit.

It can be seen that total revenue or total profit is maximum when both bookstores sell a total of 12 textbooks.

The maximum total revenue or total profit is $216.

So,

Each bookstore gets $108 as profit.

Now, University Bookstore cheats on the agreement by selling 10 textbooks while College Bookstore sells only 6 textbooks.

So, a total of 16 textbooks are sold.

16 textbooks are sold at price of $12 per textbook.

Profit of University Bookstore = Price * quantity = $12 * 10 = $120

Profit of College Bookstore = Price * quantity = $12 * 6 = $72

The profit of College Bookstore decreases from $108 to $72 due to cheating by University Bookstore.

Thus,

As a result, College Bookstore will experience a decrease in profit by $36.