Question
The data for two firms (Firm 1 and Firm 2) are given below. There is no fixed cost. P Q TR MR TC MC Profit
The data for two firms (Firm 1 and Firm 2) are given below. There is no fixed cost.
| P | Q | TR | MR | TC | MC | Profit |
| 45 | 1 | 45 | 0 | 10 | 0 | 35 |
| 40 | 2 | 80 | 35 | 20 | 10 | 60 |
| 35 | 3 | 105 | 25 | 30 | 10 | 75 |
| 30 | 4 | 120 | 15 | 40 | 10 | 80 |
| 25 | 5 | 125 | 5 | 50 | 10 | 75 |
| 20 | 6 | 120 | -5 | 60 | 10 | 60 |
| 15 | 7 | 105 | -15 | 70 | 10 | 35 |
| 10 | 8 | 80 | -25 | 80 | 10 | 0 |
A.If the two firms collude and form a cartel, what is the joint profit-maximizing level of output and price? (4 marks)
B. What would happen to Firm 2's profit if it increased its production by one unit while Firm 1 stuck to the cartel agreement? (4 marks)
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New Products Management
Authors: C Merle Crawford
12th Edition
1260512010, 9781260512014
