Table 17-10
The table shows the demand schedule for a particular product.
-Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?
A)$40
B)$50
C)$60
D)$70

Question

Table 17-10
The table shows the demand schedule for a particular product. 
-Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?
A)$40 
B)$50 
C)$60 
D)$70

Quizplus · Accepted Answer

A cartel will set the price where marginal cost equals marginal revenue. Since the marginal cost is constant at $40, the cartel will set a price higher than the marginal cost to maximize profits. The price of $70 is likely the monopoly price that maximizes joint profits for the cartel.

Table 17-10 The Table Shows the Demand Schedule for a Particular Product