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CENGAGE | MINDTAP Homework(Ch 17) Attempts|0 | 0.7 Keep the Highest 0.7 / 3 2. Deviating from the collusive outcome Mays and Mccovey are beer-brewing companies that operate in a duepoly (two-finn oligopoly). The daily marginal cast (MC) of producing a can of beer is constant and equals $1.20 per can. Assume that neither fin had any startup costs, so marginal cost equals average total cost (ATC) for each firm. oppose that Mays and MeCovey form a cartel, and the firms divide the output everly. ( Note. This is only for convenianes; nothing in this model equires that the two companies must equally share the output.) following graph to indicate the profit-maximizing price and combined quantity of output if Mays and Mccovey choose to work together. 200 Demand 1.60 Monopoly Outcome 1.40 MC-ATC 1.20 1.00 PRICE (Dollars par call 0.30 0.60 0.40 020 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Cans of beer) When they act as a profit-maximizing cartel, each company will pre Jeans and charg= par can, Given this information, cach firm earns a daily profit of . zo the daily total industry it in the beer market = = operatively and act in their own self-interest even though this depress as total profit in the market, Again, assume the two companies forn a cartel and decide to work together. Both firms initially agree to produce hell the quantity that maximizes total industry profit. Now, suppose that Mays decides to break the on and increase its output by 50%%, whis Mccovey continues to produce the amount sat under the collusive agreement. Mays's deviation from the collu was the price of a can of beer to . while Mccovey's profit is news .Therefore, y clude that total industry profit output beyond the collusive quantity. Grade It Now Save & Continue Continue without saving