Stargell and Schmidt are brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $1.20 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm.Suppose that Stargell and Schmidt form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.)

Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Stargell and Schmidt choose to work together.

2.00 Demand 1.80 1.60 Monopoly Outcome 1.40 MC = ATC 1.20 1.00 PRICE (Dollars per can) 0.80 0.60 0.40 0.20 MR 0 0 60 120 180 240 300 360 420 480 540 600 QUANTITY (Cans of beer)