## (Solved) Three oligopolists, A, B and C, produce an identical product

11. Three oligopolists, A, B and C, produce an identical product, Q. Q is produced under conditions of constant costs, that is, AC = MC = \$100. The market demand schedule for Q is: Price Quantity Demanded \$1,000 0 950 25 900 50 850 75 800 100 750 125 700 150 650 175 600 200 550 225 500 250 450 275 400 300 a) A, B, and C decide to act illegally as a cartel, to divide the market equally among the three of them, and to set the price and output that will maximize their total profits. What price and output do they set? What is the output level that each of the firms agrees to? What profit is earned by each firm and by the three firms together? b) A is impressed with the honesty of B and C, and believes they will keep to their agreements. They do, and A cheats by increasing output by 25 units. What is the new market price? How have the profit levels of A, B, and C changed? How have total profits in the industry changed? c) What actions are B and C likely to take in retaliation? Show how these actions will affect the market price, and the profit levels of the three firms. d) What can you learn from this problem about the likely stability of a cartel?

Solution details:
STATUS
QUALITY
Approved

This question was answered on: Oct 15, 2019

Solution~000.zip (25.37 KB)

STATUS

QUALITY

Approved

Oct 15, 2019

EXPERT

Tutor

#### YES, THIS IS LEGAL

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

• As a reference for in-depth understanding of the subject.
• As a source of ideas / reasoning for your own research (if properly referenced)
• For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

### Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.