Table 17-12
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.
-Refer to Table 17-12. If there are exactly two sellers of gasoline in Driveaway and if they collude, then which of the following outcomes is most likely?

Question

Table 17-12
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. 
-Refer to Table 17-12. If there are exactly two sellers of gasoline in Driveaway and if they collude, then which of the following outcomes is most likely?

Quizplus · Accepted Answer

If the two sellers collude, they will act as a monopoly and jointly maximize profit. Based on the demand schedule, the total quantity demanded at a price of $5 per gallon is 150 gallons. If the sellers split the market equally, each seller will sell 75 gallons. To determine the price, the sellers will set marginal cost equal to marginal revenue. The marginal cost is $2 per gallon, and the marginal revenue is the change in total revenue from selling one more gallon, which is the same as the price. At a quantity of 75 gallons, the price that maximizes total revenue is $5 per gallon. Therefore, each seller will charge $5 per gallon if they collude.

Table 17-12 the Table Shows the Town of Driveaway's Demand Schedule for Schedule