What profit is earned by each firm, Cost Accounting

Assignment Help:

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?


Related Discussions:- What profit is earned by each firm

Explain the respective roles of the securities, Explain the respective role...

Explain the respective roles of the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) in the setting of accounting standards?

Differential costing, What do you mean by differential costing ? How it dif...

What do you mean by differential costing ? How it differ from marginal costing ? explain its practical application with examples?

Effects of increasing fixed cost, Jones Company operates within a monopolis...

Jones Company operates within a monopolistically competitive industry. The estimated demand for its products is given by the following inverse demand function P = 1760 - 12Q

Cost, what is traditional costing system

what is traditional costing system

Marginal costings, how marginal cost of a product is determined?

how marginal cost of a product is determined?

Absorbtion, when one firm purchase other and take over its all assets.balan...

when one firm purchase other and take over its all assets.balance sheet of absorbed firm shows goodwill,should we goodwill as well?

Overhead costs, Overhead Costs Introduction Overhead costs may be...

Overhead Costs Introduction Overhead costs may be defined like the net cost of indirect materials, indirect expenses and indirect labour. They may happen or be charged to

Standard costing, behavioral aspect of standard costing

behavioral aspect of standard costing

Prepare the capital accounts, Shirley and Ken are in partnership, trading i...

Shirley and Ken are in partnership, trading in the construction industry. The year end for the partnership business is 30 June. You are the Assistant Accountant and have been as

Calculate the cumulative cash flows, Assume that you are the purchaser of t...

Assume that you are the purchaser of the building at the end of the construction period, and you have paid the developer an amount which gives you a 7% annual return on net revenue

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd