Ch.13 HW - the rest of the market share Therefore it is a...

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Anthony Marsala EC251H Sec. 2 Professor Woodbury Ch.13 Homework Pg. 469 #1, 4, 7, 17, 30 1. The graph on the left shows the market competition for oil while the graph on the left shows the industry production and profits under the cartel agreement. Cartel members may be inclined to cheat from the agreement set by the group because at increased production (q cheat ) they can earn greater profits. This is because the market price will remain close to p m since the other cartel members are still producing at q m and one firm will not significantly affect the market price. 4.
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7. No, if two firms act simultaneously the Stackelburg outcome is unlikely because in Stackelburg Equilibrium, one firm chooses how much to produce and the other firm picks up
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Unformatted text preview: the rest of the market share. Therefore, it is a sequential model instead of a simultaneous model like Cournot. 17. The profit of the individual firm will decrease and the number of firms in the market will also decrease because the AC exceeds the market price, which means firms are operating at a loss and the market can no longer accommodate extra firms. 30. a. Under collusive equilibrium, firm 1 will produce an output of 25 at price 95 when market output is 50. Firm 2 will produce output 20 at price 100 when market output is 40. b. Under Cournot equilibrium, Firm 1 will produce 50 units at price 70 while Firm 2 produces 40 units at price 80. Market output will be 90....
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Ch.13 HW - the rest of the market share Therefore it is a...

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