A two-firm cartel that produces at a constant marginal cost of $20 faces a market inverse demand curve of P = 100 - 0.50Q. Initially, both firms agree to act like a monopolist, each producing 40 units of output. If one of the firms cheats on the agreement (assuming the other firm is compliant and continues to produce at 40 units), how much output should the cheating firm produce to maximize profits?
C) an oligopoly industry is characterized by excess demand despite a market-clearing price.
I. If one firm produces 2 more units of output, its profits will rise to $864.
II. In a cartel, compliant firms will earn rising profits as cheating firms lower prices by expanding output.
I. Oligopoly is a form of imperfect competition.
A two-firm cartel that produces at a constant marginal cost of $20 faces a market inverse demand curve of P = 100 - 0.50Q. Initially, both firms agree to act like a monopolist, each producing 40 units of output. If one of the firms cheats on the agreement (assuming the other firm is compliant and continues to produce at 40 units), how much output should the cheating firm produce to maximize profits?
C) an oligopoly industry is characterized by excess demand despite a market-clearing price.
I. If one firm produces 2 more units of output, its profits will rise to $864.
II. In a cartel, compliant firms will earn rising profits as cheating firms lower prices by expanding output.
I. Oligopoly is a form of imperfect competition.