Question
A two firm cartel is formed producing an industrial good. The duopoly cartel faces the following demand curve: Qd = 400 - 20*P P =
A two firm cartel is formed producing an industrial good. The duopoly cartel faces the following demand curve:
Qd = 400 - 20*P
P = 20 - 0.05*Q
MR = 20 - 0.1*Q
The MC and ATC of each firm takes the following form:
Firm 1: MC1 = 8 + 0.4*Q1 and ATC1 = 8 + 0.2*Q1
Firm 2: MC2 = 4 + 0.4*Q2 and ATC2 = 4 + 0.2*Q2
a. What is the profit maximizing/loss minimizing output level, Q, for the cartel?
b. What is the corresponding price for the output, Q?
c. What is the individual output for each firm 1 and firm 2?
d. What is the individual total profit for each firm 1 and firm 2?
e. What is the cartel's total profit?
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