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 (ATC) for each firm. Suppose that Stargell and Schmidt form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the protmaximizing price and combined quantity of output if Stargell and Schmidt choose to work together. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together. 2.00 1.80 Monopoly Outcome 1.60 Demand 1.40 1.20 1.00 PRICE (Dollars per can) MC = ATC 0.80 0.60 0.40 0.20 MR 0 80 160 240 320 400 480 560 640 720 800 QUANTITY (Cans of beer)When they act as a profitmaximizing cartel, each company will produce 80 cans and charge $1.20 per can. Given this information, each firm earns a daily prot of $32.00 , so the daily total industry profit in the beer market is $64.00 . Oligopolists often behave noncooperatively and act in their own selfinterest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms 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 decrease V to per can. Stargell's profit is now , while Schmidt's profit is now . Therefore, you can conclude that total industry prot V when Stargell increases its output beyond the collusive quantity