Look at the able Demand Schedule for Gadgets. The market for gadgets consits of
ID: 1224164 • Letter: L
Question
Look at the able Demand Schedule for Gadgets. The market for gadgets consits of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel and acted to maximize total industry profits, total industry outpu would be___and the price would be___
Price of a Gadget Quantity of Gadgets Demanded
$10 0
9 100
8 200
7 300
6 400
5 500
4 600
3 700
2 800
1 900
0 1,000
Explanation / Answer
Revenue (TR) = P x Q
A cartel will maximize profit in absence of any costs when total revenue is maximized (since Profit = TR - Total cost = TR - 0 = TR).
As shown in table below, Revenue (Profit) is maximized when Revenue = $2,500, price = $5 & output = 500.
Price ($) Quantity Total revenue ($) 10 0 0 9 100 900 8 200 1600 7 300 2100 6 400 2400 5 500 2500 4 600 2400 3 700 2100 2 800 1600 1 900 900 0 1000 0Related Questions
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