1.1 The figure shows the market for central processing unit (CPU) chips. If the firms’

managers compete with each other, what are the price and quantity of CPU chips? Now suppose that the producers form a cartel that maximizes the firms’ total profit. What now are the price and quantity of CPU chips? In which scenario do the firms make a larger economic profit?

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Market for CPU chips Price and cost ($ per CPU chip) $220- $200 $180 $160 S = MC $140 $120 $100 $80 $60 $40 $20 MR 0 50 100 150 200 250 300 D 350 Quantity (millions of CPU chips per year)