Table 17-10
The table shows the demand schedule for a particular product.
-Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit and there is no fixed cost, then what will the combined profit of the cartel be?
A)$15,000
B)$24,000
C)$27,000
D)$63,000

Question

Table 17-10
The table shows the demand schedule for a particular product. 
-Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit and there is no fixed cost, then what will the combined profit of the cartel be?
A)$15,000 
B)$24,000 
C)$27,000 
D)$63,000

Quizplus · Accepted Answer

The cartel will set the price and quantity where marginal cost equals marginal revenue to maximize profit. Given the constant marginal cost of $40, the cartel will choose the price and quantity combination that maximizes the difference between total revenue and total cost. Based on the table, this results in a combined profit of $27,000.

Table 17-10 The Table Shows the Demand Schedule for a Particular Product