The following information describes the demand schedule for a unique type of apple. This type of apple can only be produced by two firms because they OViln the land on which these unique trees spontaneously grow. As a result, the cost of production is zero for these , causing total revenue to equal

a. Complete the following table.

b. If the market were perfectly competitive, what price and quantity would be generated by this market? Explain.

c. If these two firms colluded and formed a cartel, what price and quantity would be generated by this market, what is the level of profit generated by the market, and what is the level of profit generated by each firm?

d. If one firm cheats and produces one additional increment (five units) of production, what is the level of profit generated by each firm?

e. If both firms cheat and each produces one additional increment (five units) of production (compared to the cooperative solution), what is the level of profit generated by each firm?

f. If both firms are cheating and producing one additional increment of output (five additional units compared to the cooperative solution), will either firm choose to produce an additional increment (five more units)? Why Of why not? What is the value of the Nash equilibrium in this duopoly market?

g. Compare the competitive equilibrium to the Nash equilibrium. In which situation is society better off? Explain.

h. What would happen to the price and quantity in this market (qualitatively) if an additional firm were able to grow these unique apples?

 

Price per Bushel $12 11 10 9 8 7 6 5 4 3210 Quantity (in bushels) 0 5 10 15 20 25 30. 35 40 45 50 55 60 Total Revenue (profit)