Table 17-7. The table shows the demand schedule for a particular product.

-Refer to Table 17-7.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 $2 per unit and there is no fixed cost,then what will the combined profit of the cartel be?
A) $40
B) $60
C) $80
D) $120

Question

Table 17-7. The table shows the demand schedule for a particular product.
 
-Refer to Table 17-7.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 $2 per unit and there is no fixed cost,then what will the combined profit of the cartel be?
A) $40 
B) $60 
C) $80 
D) $120

Quizplus · Accepted Answer

The cartel will set the price and quantity where marginal cost equals marginal revenue to maximize profit. Assuming the demand curve is linear, the profit is calculated as (Price - Marginal Cost) * Quantity. If the price is set at $6 (where MR=MC), the quantity is 20 units, leading to a profit of (6-2)*20 = $80.