2. Deviating from the collusive outcome Stargell and Schmidt are brewing companies that operate in a duopoly [twofirm oligopoly]. The daily marginal cost (MC) of producing a can of beer is constant and equals $0.80 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (MC) for each rm. Suppose that Stargell and Schmidt form a cartel, and the rms divide the output evenly. (Note: This is onlyr for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (piers symbol) on the following graph to indicate the protmaximizing price and combined quantity of output 1'1\" Stargell and Schmidt Choose to work together. C?) 2.00 1 so _ Lag Demand Monopoly Outcome 1 .40 1 .20 1 .00 MC = ATC 0.30 PRICE (Dollars per can) 0.60 0.40 0.20 u so 130 270 350 450 540 6310 T20 310 900 QUANTITY {Cans of beer) when they act as a profitmaximizing cartel, each company will produce |:|cans and charge per can. Given this information, each rm earns a daily prot 0- , so the daily total industry prot in the beer market is . Oligopolists often behave noncooperatively and act in their own selfinterest even though this decreases total prot in the market. Again, assume the two companies form a cartel and decide to work together. Both rms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to V to per can. Stargell's profit is no_, while Schmidt's prot is no_ . Therefore, you can conclude that total industry prot v when Stargell increases its output beyond the collusive quantity