Table 16-1
The table below shows the total demand for viewing a rare penguin species at a local reserve. Ecotour companies have to build discreet viewing hides for tourists to view the penguins. Each ecotour company has to pay a fixed fee of $10 000 for the right to build on the reserve. Assume that hides can be supplied to tourists at zero marginal cost. Tickets are sold to tourists to use the viewing hides.
Any firm can change tickets by steps of 1000 only. Prices for missing quantities are the exact midpoint between two adjacent prices.
-Refer to Table 16-1. Assume that there are two ecotourist companies operating in this market. If they are able to collude on the price of tickets to sell, what price will they charge, and how many tickets will they collectively sell?
A) $24 2000
B) $24 4000
C) $12 2000
D) $12 4000

Question

Table 16-1
The table below shows the total demand for viewing a rare penguin species at a local reserve. Ecotour companies have to build discreet viewing hides for tourists to view the penguins. Each ecotour company has to pay a fixed fee of $10 000 for the right to build on the reserve. Assume that hides can be supplied to tourists at zero marginal cost. Tickets are sold to tourists to use the viewing hides.
  Any firm can change tickets by steps of 1000 only. Prices for missing quantities are the exact midpoint between two adjacent prices.
-Refer to Table 16-1. Assume that there are two ecotourist companies operating in this market. If they are able to collude on the price of tickets to sell, what price will they charge, and how many tickets will they collectively sell?
A) $24 2000 
B) $24 4000 
C) $12 2000 
D) $12 4000

Quizplus · Accepted Answer

If the two ecotourist companies collude, they would act as a monopoly in the market. The monopoly quantity is the sum of the quantities demanded by both companies at the point where marginal revenue equals marginal cost. From the table, this occurs at a price of $24 and a quantity of 4000 tickets. Therefore, the colluding companies would charge a price of $24 for a ticket and collectively sell 4000 tickets. The answer is option B.

Table 16-1 the Table Below Shows the Total Demand for Viewing a Viewing