Assume that demand for a product that is produced at zero marginal cost is refle
ID: 1126824 • Letter: A
Question
Assume that demand for a product that is produced at zero marginal cost is reflected in the table below. 2. QuantityPrice S36 $33 $30 $27 $24 $21 $18 $15 $12 $ 9 $6 $3 S 0 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel? Assume that this market is characterized by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a Nash equilibrium? a. b.Explanation / Answer
a. The profit maximizing level of production is at 1200 where it has $18 price and the quantity is 1200 in a oligopolistic firm that it operate with the cartel.
b. The market price for the nash equilibrium in this case would be 2400 as the price is $0 and the marginal cost is also 0 where a duopoly collusive agreement are been illegal.