Figure 8.7
-Figure 8.7 shows the market for a successful price-fixing arrangement (cartel) between two identical firms. When the two firms act like one and charge the same price, the market price will be ________ and each firm will produce and sell a quantity of ________.

Question

Quizplus · Accepted Answer

In a successful price-fixing arrangement (cartel), firms agree to act as a monopoly, setting the same price to maximize joint profits. The correct choice indicates that the market price will be set at $10, and since the two firms are identical and share the market equally, each will produce and sell a quantity of 100 to match their half of the total output that would be produced by a monopolist at this price level.

Figure 8.7 -Figure 8.7 Shows the Market for a Successful Price-Fixing Arrangement