Two firms have formed a centralized cartel in order to maximize profit on the market. Their marginal cost curves are: MC_A = 2Q_A and MC_B = 3Q_B. If the marginal revenue curve of the market is MR = 100-0.8Q, what quantity should Firm B produce? A) Q=20 B) Q=30 C) Q=40 D) Q=50

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The correct answer is A.The profit-maximizing quantity for a cartel is found by setting the marginal revenue equal to the marginal cost of the cartel. In this case, the marginal cost of the cartel is MC = 2Q_A + 3Q_B. Setting this equal to the marginal revenue, we get:100 - 0.8Q = 2Q_A + 3Q_BSubstituting Q_A = 50 - 0.4Q into this equation, we get:100 - 0.8Q = 2(50 - 0.4Q) + 3Q_BSimplifying, we get:100 - 0.8Q = 100 - 0.8Q + 3Q_BSubtracting 100 - 0.8Q from both sides, we get:3Q_B = 0Solving for Q_B, we get:Q_B = 0Therefore, Firm B should produce 0 units of output.

Two Firms Have Formed a Centralized Cartel in Order to Maximize