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The table shows the demand schedule for a particular product.

Quantity Price
0 16
1 14
2 12
3 10
4 8
5 6
6 4
7 2
8 0

Suppose the market for this product is served by two firms that have formed a cartel. If the marginal cost of production is $4 and the fixed cost is $6, the combined profit of the cartel will be _______.

Respuesta :

abdullahfarooqi

Answer:

The combined profit of the cartel will be $12

Explanation:

TC=FC+MC*Q ........ the MC is constant so it is equal to average variable cost

MC=$4 at all levels

TR=P*Q

MR(n)=(TR(n)-TR(p))/(n-p)

it is true for n>p

profit=TR-TC

A cartel maximize profit at MR=MC or the nearest lower MC

the output is Q=3 units and P=$10

profit=$12

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