Suppose the demand for oil is P=122Q 0.20. There are two oil producers who do not cooperate. Producing oil costs $13 per barrel. What is the profit of each cartel member?
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- consider the market for oil. Suppose for simplicity that there are only two oil roducing countries-Saudi Arabia and Kuwait. Both countries must choose hether to produce a low output or a high output. These output strategies with corresponding profits are depicted in the ayoff matrix to the right. Kuwait's profits are in red and Saudi Arabia's are in blue. Kuwait Suppose the two countries form a cartel. What is the cooperative equilibrium? Low Output High Output O A. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output. $125 $75 Low Output $8 $13 O B. A cooperative equilibrium does not exist for this game. O C. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output. Saudi Arabia $98 $70 O D. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output. High Output $5 $8 O E. The cooperative equilibrium is for Saudi Arabia to produce…The table shows the demand schedule for a particular product. Quantity Price 0 100 300 90 600 80 900 70 1200 60 1500 50 1800 40 2100 30 2400 20 2700 10 3000 0 Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market? a. $40 b. $50 c. $60 d. $70 e. $80Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the short-run Phillips curve that is consistent with these expectations, assuming that it is parallel to SRPC₂- Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy. The inflation rate at point C is unemployment rate at point A. the inflation rate at point A, and the unemployment rate at point C is Was the central bank able to achieve its goal of lowering…
- The payoff matrix represents hypothetical profits that could be earned by two milk sellers who have formed a cartel. Each seller must decide whether or not to cheat on the production quotas in the cartel agreement. Use the payoff matrix to answer the questions. Heifer's Gold Cheat Do not cheat Cheat A Milky Moos $148,000 $148,000 $200,000 $140,000 Do not cheat B a. Does either member have an incentive to cheat? $200,000 D $140,000 $150,000 Milky Moos will cheat, but Heifer's Gold will not. No, neither has an incentive to cheat. Heifer's Gold will cheat, but Milky Moos will not. Yes, both will cheat. $150,000 b. How does cheating impact the other cartel member? O Cheating hurts the member who does not cheat by decreasing its profits. Cheating does not impact the other member. Cheating helps the other cartel member by increasing its profits.Imagine there are two companies, East Wafer and West Wafer, which produce silicon wafers, the base component in the microchips which constitute the brains of our computers. Below is the daily demand for silicon wafers Suppose, for simplicity, East Wafer and West Wafer have the same constant cost structure, so maximizing total revenue maximizes profit. If East Wafer and West Wafer are able to form a cartel and collude without cheating on each other, what will be the price of a silicon wafer? $40 $50 $60 $70Suppose tuition fees for a university increase from £3,000 to £9,000. Afterthe increase, enrolment drops by 5%. e) Explain why setting up a cartel and maintaining collusion may be difficultin general.f) Explain how a maximum tuition fee of £9000 imposed by the governmentmay facilitate collusion between universities.
- What is a cartel? Explain the coordination problem it faces.1. Consider a market for water with two firms. We assume two firms can produce the good without any cost (TC= 0). The market demand schedule is given as: Quantity (gallon) Price ($) 30 90 40 80 50 70 60 60 70 50 80 40 90 30 100 20 110 10 Cartel: Assume that two firms are colluding, so both firms agree upon a contract that they produce the same amount of output. a. How much would each firm produce if they form the cartel? Why?Coke and Pepsi dominate the cola market. Suppose that the marginal cost of making cola is $2. Assume also that the demand for cola is given by the following table: Price $8 7 6 5 4 3 2 1 Quantity 5 cans 6 7 8 9 10 11 12 Suppose Coke and Pepsi both supply cola. They form a cartel and agree to cooperate on how much soda to produce. In this cartel case, how many bottles of cola would be sold? Type your answer...
- What are some examples of cartels that failed over the years.Pleasant Island has two natural gas wells, one owned by Mack and the other owned by Tom. Each well has a valve that controls the rate of flow of gas, and the marginal cost of producing gas is zero. The table below gives the demand schedule for gas on this island. Price (dollars per unit) $100 88888; 70 50 30 20 10 0 Quantity Demanded (units per day) If Mack and Tom form a cartel and maximize their joint profits, the price of gas on Pleasant Island will be $ If Mack and Tom are forced to sell at the perfectly competitive price, the price of gas on Pleasant Island will be $ 5 15 25 35 45 55 65 per unit. (Enter your response as a whole number) per unit (Enter your response as a whole number)Why is the graph of the cartel drawn exactly the same as the monopoly graph?