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In: Economics

Two companies (A and B) are duopolists that produce identical products. Demand for the products is...

Two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following demand function: P = 1,000 - QA - QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are: TCA = 50,000 + 200QA + .5QA2 TCB = 20,000 + 400QB + QB2

Assume that the firms form a cartel to maximize total industry profits (sum of Firm A and Firm B profits).

Determine the optimum output and selling price for each firm. Hints: refer to an example - Cartel Analysis

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Expert Solution

Rahul Sunny answered 2 years ago
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