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Firm A and Firm B are two of the largest producers of a special pool-cleaning robot Suppose that the marginal cost of making such a robot is constant at $1500 per unit and there is no start-up cost

Firm A and Firm B are two of the largest producers of a special pool-cleaning robot Suppose that the marginal cost of making such a robot is constant at $1500 per unit and there is no start-up cost

Firm A and Firm B are two of the largest producers of a special pool-cleaning robot. Suppose that the marginal cost of making such a robot is constant at $1,500 per unit and there is no start-up cost. The demand for the robot is described by the following table.

Price

Quantity

TR

MR

MC

TC

Profit

$8,500

5,500

         

7,500

6,500

         

6,500

7,500

         

5,500

8,500

         

4,500

9,500

         

3,500

10,500

         

2,500

11,500

         

1,500

12,500

         

a) Complete the columns for total revenue, marginal revenue, marginal cost, total cost, and profit in the table above.           

b) If the market for the robots were perfectly competitive, what would the price and quantity be?   

c) If there were only one supplier of robots (i.e., a monopoly), what would the price and quantity be?   

d) If the two firms formed a cartel, what would be the price and quantity? If the two firms split the market evenly, what would Firm AAc€?cs production and profit be?                                                                                         

e) What would happen to Firm AAc€?cs profit if it increased its production by 1,000 while Firm B stuck to the cartel agreement?

abhinav behal 11-May-2020

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