Use the following to answer questions : $$\begin{array}{l}
\text { Table: Demand for Crude Oil }\
\begin{array} { c c c }
\text { Quantity } & \begin{array} { c }
\text { Price } \
\text { (\$/barrel) }
\end{array} & \begin{array} { c }
\text { Total } \
\text { Revenue (\$) }
\end{array} \
\hline 0 & \$ 160 & \$ 0 \
10 & 150 & 1500 \
20 & 140 & 2800 \
30 & 130 & 3900 \
40 & 120 & 4800 \
50 & 110 & 5500 \
60 & 100 & 6000 \
70 & 90 & 6300 \
80 & 80 & 6400 \
90 & 70 & 6300 \
100 & 60 & 6000 \
110 & 50 & 5500 \
120 & 40 & 4800 \
130 & 30 & 3900 \
140 & 20 & 2800 \
150 & 10 & 1500 \
160 & 0 & 0
\end{array}
\end{array}$$
-(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal and fixed costs of producing crude oil equal zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If firm 1 decides to cheat and increase production by 10 more barrels,it will earn profits of:
A) $6 400.
B) $6 300.
C) $3 500.
D) $2 800.

Question

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Demand for Crude Oil }\
\begin{array} { c c c } 
\text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (\$/barrel) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue (\$) }
\end{array} \
\hline 0 & \$ 160 & \$ 0 \
10 & 150 & 1500 \
20 & 140 & 2800 \
30 & 130 & 3900 \
40 & 120 & 4800 \
50 & 110 & 5500 \
60 & 100 & 6000 \
70 & 90 & 6300 \
80 & 80 & 6400 \
90 & 70 & 6300 \
100 & 60 & 6000 \
110 & 50 & 5500 \
120 & 40 & 4800 \
130 & 30 & 3900 \
140 & 20 & 2800 \
150 & 10 & 1500 \
160 & 0 & 0
\end{array}
\end{array}$$
-(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal and fixed costs of producing crude oil equal zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If firm 1 decides to cheat and increase production by 10 more barrels,it will earn profits of:
A) $6 400.
B) $6 300.
C) $3 500.
D) $2 800.

Quizplus · Accepted Answer

If firm 1 cheats and increases production by 10 barrels, the total quantity becomes 80 barrels, leading to a total revenue of $6,400. Since the firms were initially splitting profits evenly at 70 barrels ($6,300 total revenue), firm 1's share was $3,150. By cheating, firm 1 captures the additional $1,250 in revenue, totaling $3,500.

Use the Following to Answer Questions -(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil