Two firms conspire to charge a monopoly price

Assignment Help Business Economics

Reference no: EM131004669

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P: 1,000 * l\Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero.

a. What is each firm's profit?

b. Now suppose that Ney Inc. reneges on the cartel agreement and decides to produce an additional 10 sets of bucket teeth per day. What is each firm's new profit?

Reference no: EM131004669

Questions Cloud

Consider the market for vegan soup : Consider the market for vegan soup, where two firms, Kibble and Flesh Not, are in Stackelberg competition. Flesh Not observes Kibble's output level before choosing its desired output level. The market inverse demand curve for vegan soup is P: 18 - Q,..

Technology transfer in the solow model : Technology transfer in the Solow model: One explanation for China’s rapid economic growth during the past several decades is its expansion of policies that encourage “technology transfer.” Draw a graph showing what happens to output in China over tim..

Market characterized by the inverse demand curve : There are two firms that are producing identical goods in a market characterized by the inverse demand curve P:60 -2Q, where Q is the sum of Firm l's and Firm 2's output, qft qz. Each firm's marginal cost is constant at$12, and fixed costs are zero. ..

Savings and investment in the open economy : Now assume that the economy is open and that the world interest rate is determined on the world market instead of in the domestic economy. Use a two-country model with initial current accounts equal to zero. How does an increase in domestic wealth af..

Two firms conspire to charge a monopoly price : Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. What is each firm's profit? Now suppose that Ney Inc. reneges on th..

Decrease in price of? gasoline-holding other thing? constant : Gasoline prices in the United States decreased significantly between 2008 and 2009. A decrease in the price of? gasoline, holding other things? constant, will cause which of the following to? occur?

Practical significance of income elasticity coefficients : What is the practical significance of income elasticity coefficients? Explain the significance using as examples an income elasticity of 3.0 for automobiles and an income elasticity of 0.20 for home-cooked meals.

Fiscal policy-defined as decrease in private expenditure : What is Fiscal policy? Crowding out effect is defined as "the decrease in private expenditure (C+I) as a consequence of increase in government spending (G) or the financial needs of a budget deficit". So, crowding out cannot have a "positive" effect ..

Based on personal experience-elastic demand : Based on your personal experience, please post one good that you think has elastic demand, and one good that has inelastic demand. Please include an explanation as to why you chose these goods.

User Account

All Pages