Each member of a cartel
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Each member of a cartel has an incentive to cheat
It does so by increasing its output which increases the market output and lowers the market price which will increase total revenue for the cheating firm
option(A)
Each member of a cartel a. faces a temptation to cheat on the agreement because lowering...
Breakdown of a cartel agreement 3. Breakdown of a cartel agreement Aa Aa E Imagine that there is a town in which only two of the residents, Stelios and Sondra, own wells that produce water safe for drinking, and imagine that Stelios and Sondra can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price per Litre ($) Litres Demanded 6....
2. Breakdown of a cartel agreement Consider a town in which only two residents, Manuel and Poornima, own wells that produce water safe for drinking. Manuel and Poornima can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Total Revenue Price Quantity Demanded (Dollars per gallon) (Gallons of water) (Dollars) 3.60 0 3.30 35 $115.50 3.00 70 $210.00 105 $283.50 2.70...
3. Breakdown of a cartel agreement Consider a town in which only two residents, Felix and Janet, own wells that produce water safe for drinking. Felix and Janet can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price (Dollars per gallon) 5.40 Quantity Demanded (Gallons of water) 0 Total Revenue (Dollars) 0 4.95 40 $198.00 4.50 80 4.05 120 3.60...
6. Breakdown of a cartel agreement Consider a town in which only two residents, Tim and Alyssa, own wells that produce water safe for drinking. Tim and Alyssa can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 6.00 0 0 5.50 45 248 5.00 90 450 4.50 135...
Do No Harm: 4 6. Breakdown of a cartel agreement Consider a town in which only two residents, Brian and Crystal, own wells that produce water safe for drinking. Brian and Crystal can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Quantity Demanded (Gallons of water) Total Revenue (Dollars) Price (Dollars per gallon) 6.00 5.50 5.00 4.50 4.00 248 450...
3. Breakdown of a cartel agreement Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water Quantity Demanded (Gallons of water) Total Revenue (Dollars) Price (Dollars per gallon) 3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50 1.20 0.90 0.60...
3. Breakdown of a cartel agreement Consider a town in which only two residents, Brian and Crystal, own wells that produce water safe for drinking, Brian and Crystal can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water Price (Dollars per gallon) 3.00 Quantity Demanded (Gallons of water) Total Revenue (Dollars) 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement OD. both firms cheat on the agreement. O E. one of the firms exits the market. In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and...
22. Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) and that the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price-taker would: a. immediately shut down and get out of the industry. b. continue to produce a quantity of output such that its marginal revenue equals marginal cost. c. shut down temporarily, in hopes...