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An oligopolistic industry consists of only two firms, Angel & Co. and Barton Inc. The two firms agree to collude on a level of output
An oligopolistic industry consists of only two firms, Angel & Co. and Barton Inc. The two firms agree to collude on a level of output at 20 units per firm, which leads to a market price of $25. After one year of colluding, Angel & Co. begins cheating by increasing output to 30 units. Barton Inc. continues to produce 20 units as agreed. The market price falls to $20. Assume that it costs each firm $5 to produce each unit. By how much is total profit in the industry reduced when Angel & Co. cheats on the collusion agreement? Answer here
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