final_bl5 - The Colorado College Department of Economics...

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1 The Colorado College Department of Economics and Business Block 5: Principles of Microeconomics Block 5 Econ 151 Final. End Block celebration of knowledge. Do all 4 questions. Time: 2 hours and 30 minutes. Please be clear and precise with the answers. Write and sign you follow the CC Honor Code. Turn in question paper along with answer booklet. 1) (a) The following information describes the market demand schedule for a unique type of apple. This type of apple can only be produced by two firms because they own the land on which these unique trees spontaneously grow. As a result, the marginal and total cost of production is zero for these duopolists, causing total revenue to equal profit. Price per bushel Quantity (in bushels) Total Revenue 12 0 11 5 10 10 9 15 8 20 7 25 6 30 5 35 4 40 3 45 2 50 1 55 0 60 (i) Calculate the total revenue corresponding to each price-quantity level. (2 points) (ii) If the duoplolists were forced to charge a perfectly competitive price, what price and quantity would be generated by this market? Explain. (2 points) (iii) If these two firms colluded and formed a cartel, what price and quantity would be generated by the cartel? What is the level of profit for the cartel? If they decide to share the quantity produced and profit equally, what is the level of profit and quantity for each firm? (2 points) (iv) If one firm cheats and produces one additional increment (five units) of production, what is the level of profit generated by each firm?
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