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Suppose the ve landscapers in your neighborhood form a cartel and decide to restrict output to 16 lawns each per week, for a total of
Suppose the ve landscapers in your neighborhood form a cartel and decide to restrict output to 16 lawns each per week, for a total of 80 lawns in the entire market, in order to keep prices high. The weekly demand curve for lawn-mowing services is shown in the following chart. Assume that the marginal cost of mowing a lawn is a constant $10 per lawn. a. What is the market price under the cartel's arrangement? Price $40 30 Demand 80 90 Quantity What is each landscaper's prot per week under this arrangement? b. Suppose one untrustworthy landscaper decides to cheat and increase her own output by an additional 10 lawns. What is total revenue from such behavior for this landscaper? What is the marginal revenue per lawn from cheating? What is the marginal revenue per lawn from cheating? The marginal revenue from the extra lawns is the marginal cost from the extra lawns. c. It is a good idea for the untrustworthy landscaper to cheat because . A potential downside to cheating is
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