661 Figure 11.3 Reference: Ref 11-5 (Figure 11.3) The graph depicts a four-firm industry, an industry with no fixed costs. Suppose that the four firms are colluding by acting like a monopolist, with each firm producing one-fourth of the market output. If one of the firms cheats on the cartel agreement and produces an additional unit of output, the profits of each of the noncheating firms will:
662 Which of the following statements is TRUE? I. The gain in profit from cheating on a cartel agreement is greater if there athe cartel. II. In a cartel, noncheating firms will experience rising profits, as cheating fby expanding output. III. If a firm cheats on a cartel agreement, the loss in profit to the noncheatinsmaller in a two-firm cartel than a four-firm cartel.
663 A market is characterized with the inverse demand curve P= 130 –1.5Q,and marginal cost of production is constant at $10. If this market is served by a two-firm cartel that evenly splits the market output, how much output does each firm produce? 20 units (True Answer )Correct 80 units Incorrect 40 units Incorrect 65 units Incorrect