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Cartels are the group that is created by the firms in the market to gain control over the prices and the entire goods market.
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- OPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?In order to be successful, a cartel must find a way to encourage members to produce more than they would otherwise produce. agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. agree on the total level of production and on the amount produced by each member. agree on the prices charged by each member, but they need not agree on amounts produced.What is the primary reason that cartels fail to work? Becoming a cartel reduces barriers to entry for new firms. It is trivial for one firm to force the other cartel members out of the market and become a monopoly. Firms in a cartel can increase their profits by breaking the agreements made with the other cartel firms. Anti-trust law is quick to break up cartels. Operating as part of a cartel is more expensive and reduces profits.
- Consider an industry with two firms, each having marginal costs and total costs equal to zero. The industry demand is P = 100 − Q where Q = Q1 + Q2 is total output. 1. Find the cartel output and cartel profits assuming that the firms share the profit equally. In cartels, firms behave as if they are a monopoly. Hence, the cartel quantity is at the point where MR = MC. After finding the quantity, use the demand curve to find the cartel price. And then calculate Π = T R − T C. Divide the total profit by 2 to find each firm's profit. 2. If each firm behaves as a Cournot competitor, what is firm 1's optimal output given firm 2's output? This part is asking the best response function of firm 1. Solve firm 1's profit maximizatin problem by setting its MC = MR. Then, express Q1 as a function of Q2. 3. Calculate the Cournot equilibrium output and profit for each firm. You have already solved firm 1's problem above. Now solve firm 2's problem. Then, solve BR functions simultaneously to get…In the United States cartels areWhen deciding on output levels, members of a cartel set their output where MR = MC. produce the same level of output as if they were in a competitive market. take into account the impact of changes on members' profits. act as if they were monopolies.
- Discuss a cartel, how it works and problems it faces.Which of the following would be cases of cartels? Check All That Apply Ford Motor Company OPEC Major League Baseball Major League Baseball The restaurant industry DeBeers MicrosoftMonopolies can maintain economic profits in the short and long run because of barriers to entry which prevent competitors from entering the market. A Monopolistic Competition market does not have barriers to entry, so firms are free to enter and leave the market. This creates a situation where there is a long and short run similar to perfect competition. Google search images and find images of graphs. To earn full credit your graphs must include the following: A graph showing: short run economic profit A graph showing: short run economic loss A graph showing: long run - normal profit (economic profit equal to zero)
- Breakdown of a cartel agreementEvaluate the following statement: "A cartel will put an end to price wars, which is a barbaric form of competition that benefits no one."Why are cartel agreements often not successful? Different firms experience different costs. All parties would make more money if everyone increased production. One party has an incentive to cheat to make more profit?