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-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets at a marginal cost of $2 and no fixed cost.Suppose that these two producers have formed a cartel,agreed to split production of output evenly,and are maximizing total industry profits.Each firm's output would be _____,and each firm's profit would be _____.
A)500;$2,500
B)200;$800
C)1,000;$500
D)1,000;$10,000

Question

Use the following to answer question: 
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets at a marginal cost of $2 and no fixed cost.Suppose that these two producers have formed a cartel,agreed to split production of output evenly,and are maximizing total industry profits.Each firm's output would be _____,and each firm's profit would be _____.
A)500;$2,500 
B)200;$800 
C)1,000;$500 
D)1,000;$10,000

Quizplus · Accepted Answer

To maximize total industry profits, the cartel would produce a total of 400 gadgets (200 from Margaret and 200 from Ray). At this level of output, the market price would be $8 per gadget. Each firm's profit would be (8-2) x 200 = $1,200. Therefore, the total profits of the two firms would be $2,400.

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