An oligopoly producing a homogeneous product is composed ofthree firms that act like a cartel. Assume that these three firmshave identical cost schedules. Assume also that if any one of thesefirms sets a price for the product, the other two firms charge thesame price. As long as they all charge the same price they willshare the market equally; and the quantity demanded of each will bethe same.
Below are the total-cost schedule of one of these firms andthe demand schedule that confronts it when the other firms chargethe same price as this firm.
Output | Total Cost | Marginal Cost | Price | Quantity Demanded | Marginal Revenue |
0 | $ 0 |
|
|
|
|
1 | 60 | $ 60 | $ 260 | 1 | $ 260 |
2 | 100 | 40 | 240 | 2 | 220 |
3 | 160 | 60 | 220 | 3 | 180 |
4 | 240 | 80 | 200 | 4 | 140 |
5 | 340 | 100 | 180 | 5 | 100 |
6 | 460 | 120 | 160 | 6 | 60 |
7 | 600 | 140 | 140 | 7 | 20 |
8 | 760 | 160 | 120 | 8 | -20 |
B) If the firms collude to maximize joint profits, what would bethe industry price, output, and profit?
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