(Table: Three-Country Oil Production) Refer to the table.Suppose that three countries are engaged in oil production.For simplicity, assume zero costs so that revenue equals profit.If the countries create a cartel and agree to mimic monopoly-like behavior, what level of output would each firm produce?

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In order to mimic monopoly-like behavior, the cartel would want to restrict output to the point where marginal revenue equals marginal cost. From the table, we can see that the total revenue for the cartel at an output level of 1,200 is $2,400,000, but the marginal revenue from increasing output from 1,200 to 1,400 is only $800,000 ($3,200,000 - $2,400,000). Thus, the cartel would not want to produce at an output level of 1,200. Similarly, the total revenue for the cartel at an output level of 700 is $1,750,000, but the marginal revenue from increasing output from 700 to 800 is only $500,000 ($2,250,000 - $1,750,000). Thus, the cartel would not want to produce at an output level of 700. At an output level of 200, the total revenue is only $400,000, which is less than the revenue from any other output level. Thus, the cartel would not want to produce at an output level of 200. The only output level where the marginal cost is equal to the marginal revenue is an output level of 400, where the total revenue is $1,600,000 and the marginal revenue is $1,600,000. Thus, each firm in the cartel would produce 400 units of oil.

(Table: Three-Country Oil Production) Refer to the Table