Question
A large share of the world supply of bauxite (used for aluminum) comes from Australia and China. Suppose that the marginal cost of mining bauxite
A large share of the world supply of bauxite (used for aluminum) comes from Australia and China. Suppose that the marginal cost of mining bauxite is constant at $3,000 per tonne and the demand for bauxite is described by P=15,000 - Qand MR = 15,000 - 2Q.
If there were many suppliers of bauxite, what would be the price and quantity?
If Australia and China formed a cartel (hint: monopoly), what would be the price and quantity?
Explain what is required for Australia and China to enjoy monopoly power in the market for bauxite?
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Fundamentals of Managerial Economics
Authors: Mark Hirschey
9th edition
324584830, 978-0324588781, 032458878X, 978-0324584837
