Refer to the Figure. Six firms that produce chewing gum have formed a cartel. Th
ID: 1213323 • Letter: R
Question
Refer to the Figure. Six firms that produce chewing gum have formed a cartel. The cartel faces the market demand curve given by D. To maximize profits, the cartel should produce ________ packs of chewing gum and the price should be ________
.
12,000; $.25
12,000; $.40
14,000; $.30
$16,000; $.35
Firms in an oligopoly can increase profit by:
Question 19 options:
jointly acting to reduce output and increase prices.
independently acting to increase price.
acting alone and refusing to join the group.
none of the above.
12,000; $.25
12,000; $.40
14,000; $.30
$16,000; $.35
Firms in an oligopoly can increase profit by:
Question 19 options:
jointly acting to reduce output and increase prices.
independently acting to increase price.
acting alone and refusing to join the group.
none of the above.
Explanation / Answer
Cartel behave like a monopoly.
It produces at MR=MC
So it produces 12000 to maximize profits.and price from demand curve at Q=12000 is 0.40$
Firms in an oligopoly can increase profit by jointly acting to reduce output and increase prices.They can collude to set price and output to maximize profits and behave like a monopoly.