Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Figure 14.1
-Refer to Figure 14.1. Six chewing gum producing firms form a cartel. The firms have identical cost structures. If the cartel produces the profit-maximizing output level, each firm should produce
A) 2,000 packs of chewing gum.
B) 6,000 packs of chewing gum.
C) 12,000 packs of chewing gum.
D) indeterminate output levels from this information.

Question

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow.  Figure 14.1
-Refer to Figure 14.1. Six chewing gum producing firms form a cartel. The firms have identical cost structures. If the cartel produces the profit-maximizing output level, each firm should produce
A) 2,000 packs of chewing gum. 
B) 6,000 packs of chewing gum. 
C) 12,000 packs of chewing gum. 
D) indeterminate output levels from this information.

Quizplus · Accepted Answer

Given that the firms form a cartel and have identical cost structures, they would collectively aim for the profit-maximizing output level and then divide this output equally among themselves. Without specific details from Figure 14.1, the general principle is that a cartel maximizes profits by reducing output to increase prices, and the output level would be determined collectively, then divided equally.

Refer to the Information Provided in Figure 14