Question
Consider a duopoly that faces a market demand = 4,500 - 4. Each firm has one manufacturing plant and each firm i has a cost
Consider a duopoly that faces a market demand = 4,500 - 4. Each firm has one manufacturing plant and each firm i has a cost function () = 2 , where is the output of firm and is the total output. The two firms form a cartel and arrange to split total industry profits equally. Under this cartel arrangement, they will maximise joint profits if
a. they produce a total of 500 units, no matter which firm produces them.
b. each firm produces 250 units in its plant.
c. they each produce a total of 562.50 units.
d. they shut down one of the two plants, having the other operate as a monopoly and produce 450 units and then splitting the profits.
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