Firm A and Firm B are two of the largest producers of a special pool-cleaning robot. Suppose that the marginal cost of making such a robot is constant at $1,500 per unit and there is no start-up cost. The demand for the robot is described by the following table.
Price
Quantity
TR
MR
MC
TC
Profit
$8,500
5,500
7,500
6,500
6,500
7,500
5,500
8,500
4,500
9,500
3,500
10,500
2,500
11,500
1,500
12,500
a) Complete the columns for total revenue, marginal revenue, marginal cost, total cost, and profit in the table above.
b) If the market for the robots were perfectly competitive, what would the price and quantity be?
c) If there were only one supplier of robots (i.e., a monopoly), what would the price and quantity be?
d) If the two firms formed a cartel, what would be the price and quantity? If the two firms split the market evenly, what would Firm A
Firm A and Firm B are two of the largest producers of a special pool-cleaning robot. Suppose that the marginal cost of making such a robot is constant at $1,500 per unit and there is no start-up cost. The demand for the robot is described by the following table.
|
Price |
Quantity |
TR |
MR |
MC |
TC |
Profit |
|
$8,500 |
5,500 |
|||||
|
7,500 |
6,500 |
|||||
|
6,500 |
7,500 |
|||||
|
5,500 |
8,500 |
|||||
|
4,500 |
9,500 |
|||||
|
3,500 |
10,500 |
|||||
|
2,500 |
11,500 |
|||||
|
1,500 |
12,500 |
a) Complete the columns for total revenue, marginal revenue, marginal cost, total cost, and profit in the table above.
b) If the market for the robots were perfectly competitive, what would the price and quantity be?
c) If there were only one supplier of robots (i.e., a monopoly), what would the price and quantity be?
d) If the two firms formed a cartel, what would be the price and quantity? If the two firms split the market evenly, what would Firm A
Related textbook solutions
Related questions
1. A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $2,000 per diamond, and the demand for diamonds is described by the following schedule:
Price Quantity (Dollars) Quantity(Diamonds)
| Price Quantity (Dollars) | Quantity (Diamonds) |
| 8000 | 2000 |
| 7000 | 3000 |
| 6000 | 4000 |
| 5000 | 5000 |
| 4000 | 6000 |
| 3000 | 7000 |
| 2000 | 8000 |
| 1000 | 9000 |
a)If there were many suppliers of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
b)If there were only one supplier of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.
c)Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____.
d) If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would ____ to ______. Why are cartel agreements often not successful?
A. One party has an incentive to cheat to make more profit.
B. Different firms experience different costs.
C. All parties would make more money if everyone increased production.
