An oligopoly market's monthly demand is given by the equation: Q = 3,840 – 0.8 P....
An oligopoly market's monthly demand is given by the equation: Q = 3,840 – 0.8 P. In creating a cartel, the four oligopolists agree to the following market shares: Firm a: 35%, Firm b: 20%, Firm c: 30%, and Firm d: 15%. They also agree to charge the same price. Their respective Total Costs functions are:
Firm a T.C. = 600,000 + 0.75 Q2
Firm b T.C. = 300,000 + 0.75 Q2
Firm c T.C. = 500,000+ 0.75 Q2
Firm d T.C. = 180,000 + 0.75 Q2
Please show your work clearly in answering the following questions:
- If the four firms live up to their agreement, how many units will each firm produce and what price will each firm charge?
- If none of the four firms cheats on the agreement, what will total profits be for each of these firms?
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An oligopoly market's monthly demand is given by the equation: Q
= 3,840 – 0.8 P....
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