(Table: Market Outcomes) Refer to the table. Suppose two firms create a cartel that attempts to mimic the monopoly profit outcome. Assume zero costs and answer the following questions. a. What quantity would each firm produce if together they were to achieve the monopoly market outcome? What would each producer's profit be? b. Is there any incentive for either of the producers to cheat and increase production by 200 units? c. If one of the producers cheats by increasing quantity by 200 units, will the other producer also retaliate and increase quantity? d. How far will market quantity increase if cheating ensues?

Question

(Table: Market Outcomes) Refer to the table. Suppose two firms create a cartel that attempts to mimic the monopoly profit outcome. Assume zero costs and answer the following questions.   a. What quantity would each firm produce if together they were to achieve the monopoly market outcome? What would each producer's profit be? b. Is there any incentive for either of the producers to cheat and increase production by 200 units? c. If one of the producers cheats by increasing quantity by 200 units, will the other producer also retaliate and increase quantity? d. How far will market quantity increase if cheating ensues?

Quizplus · Accepted Answer

The Answer of (Table: Market Outcomes) Refer to the table. Suppose two firms create a cartel that attempts to mimic the monopoly profit outcome. Assume zero costs and answer the following questions.   a. What quantity would each firm produce if together they were to achieve the monopoly market outcome? What would each producer's profit be? b. Is there any incentive for either of the producers to cheat and increase production by 200 units? c. If one of the producers cheats by increasing quantity by 200 units, will the other producer also retaliate and increase quantity? d. How far will market quantity increase if cheating ensues?

(Table: Market Outcomes) Refer to the Table