PRICE (Dollars per can) 2.00 1.80 1.60 Demand 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome $0.80 per can. Given this When they act as a profit-maximizing cartel, each company will produce 180 cans and charge information, each firm earns a daily profit of $144.00, so the daily total industry profit in the beer market is $288.00. Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to now $ , while Schmidt's profit is now $ Stargell increases its output beyond the collusive quantity. to $ per can. Stargell's profit is . Therefore, you can conclude that total industry profit when
PRICE (Dollars per can) 2.00 1.80 1.60 Demand 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 MC = ATC MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) Monopoly Outcome $0.80 per can. Given this When they act as a profit-maximizing cartel, each company will produce 180 cans and charge information, each firm earns a daily profit of $144.00, so the daily total industry profit in the beer market is $288.00. Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under the collusive agreement. Stargell's deviation from the collusive agreement causes the price of a can of beer to now $ , while Schmidt's profit is now $ Stargell increases its output beyond the collusive quantity. to $ per can. Stargell's profit is . Therefore, you can conclude that total industry profit when
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.11P
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Transcribed Image Text:PRICE (Dollars per can)
2.00
1.80
1.60
Demand
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0
0
MC = ATC
MR
90 180 270 360 450 540 630 720 810 900
QUANTITY (Cans of beer)
Monopoly Outcome
$0.80 per can. Given this
When they act as a profit-maximizing cartel, each company will produce
180 cans and charge
information, each firm earns a daily profit of
$144.00, so the daily total industry profit in the beer market is
$288.00.
Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the
two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.
Now, suppose that Stargell decides to break the collusion and increase its output by 50%, while Schmidt continues to produce the amount set under
the collusive agreement.
Stargell's deviation from the collusive agreement causes the price of a can of beer to
now $
, while Schmidt's profit is now $
Stargell increases its output beyond the collusive quantity.
to $
per can. Stargell's profit is
. Therefore, you can conclude that total industry profit
when
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