Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Thus the marginal and average cost for each firm is €40. Assume the demand curve for the industry is given by P = 100 – Q. Suppose the two firms get together and form a cartel and divide the market equally between them. The output produced by each firm will be A. 25 B. 10 C. 15 D. 20

Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Thus the marginal and average cost for each firm is €40. Assume the demand curve for the industry is given by P = 100 – Q. Suppose the two firms get together and form a cartel and divide the market equally between them. The output produced by each firm will be A. 25 B. 10 C. 15 D. 20

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter10: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 13SQ

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	Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Thus the marginal and average cost for each firm is €40. Assume the demand curve for the industry is given by P = 100 – Q. Suppose the two firms get together and form a cartel and divide the market equally between them. The output produced by each firm will be

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