Question
A cartel includes large and small companies each with different long run average and marginal cost curves. A cartel requires each member to reduce output
A cartel includes large and small companies each with different long run average and marginal cost curves. A cartel requires each member to reduce output by 15% in the short run from the total output produced while behaving competitively so that the cartel can maximize profits.the authority assigns a quota to each firm that is 15% less than the output produced by the firm in the long run competitive equilibrium
1)explain why the 15% will not maximize total profits of the cartel?
2)How could you assign the quota of each firm to maximize total cartel and profits?
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