The following graph shows the marginal cost (MC) and average total cost (ATC) and the initial demand (D₁) curves of a perfectly competitive firm. Suppose this firm forms a cartel with other firms in the industry. Because of the cartel agreement, it has been assigned a production quota of 35 units. The cartel price is $80 per unit of output. You may use the purple rectangle (diamond symbols) to help you answer the questions that follow. You will not be graded on any changes you make to the graph. PRICE (Dollars) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 20 I | ATC || D₂ If the firm adheres to the cartel agreement, its profits will be $ D₁ 1 30 40 50 60 70 80 90 100 QUANTITY (Units) Area If the firm breaks the cartel agreement and produces 85 units, its profits will be $ ?
The following graph shows the marginal cost (MC) and average total cost (ATC) and the initial demand (D₁) curves of a perfectly competitive firm. Suppose this firm forms a cartel with other firms in the industry. Because of the cartel agreement, it has been assigned a production quota of 35 units. The cartel price is $80 per unit of output. You may use the purple rectangle (diamond symbols) to help you answer the questions that follow. You will not be graded on any changes you make to the graph. PRICE (Dollars) 100 90 80 70 60 50 40 30 20 10 0 MC 0 10 20 I | ATC || D₂ If the firm adheres to the cartel agreement, its profits will be $ D₁ 1 30 40 50 60 70 80 90 100 QUANTITY (Units) Area If the firm breaks the cartel agreement and produces 85 units, its profits will be $ ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the marginal cost (MC) and average total cost (ATC) and the initial demand (D₁) curves of a perfectly competitive firm.
Suppose this firm forms a cartel with other firms in the industry. Because of the cartel agreement, it has been assigned a production quota of 35 units.
The cartel price is $80 per unit of output.
You may use the purple rectangle (diamond symbols) to help you answer the questions that follow. You will not be graded on any changes you make
to the graph.
(Dollars)
100
14
ATC
MC
PRICE
90
80
70
60
50
40
30
20
10
0
0
10 20
30
40 50 60 70
QUANTITY (Units)
D
80 90 100
If the firm adheres to the cartel agreement, its profits will be $
Area
If the firm breaks the cartel agreement and produces 85 units, its profits will be $
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