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5. Suppose the market demand for tires is given by P = 100 2Q There are two rms: Q = q1 + q; The marginal
5. Suppose the market demand for tires is given by P = 100 2Q There are two rms: Q = q1 + q; The marginal cost of producing each tire is 20, there are no xed costs, and the rms are producing identical products. The rms usually compete in a lGaul-not type setting by choosing the quantity they are going to produce simultaneously. a. How many units should each rm produce if they form a cartel? What would the prots of each rm be? b. How much prots will a rm gain by deviating from the agreed upon quantity in part \"a\"? Assume the nondeviating rm continues to produce the amount agreed upon in part "a'. e. Why will a cartel never sustain itself when the interaction between the two rms is for a nite (known) number of periods
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