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Economics Quiz 3 Multiple Choice Questions




Question;Assume you are the manager of Abba Cable Company;which provides commercial communication services to the town of Canyon Lake;Texas. Because of licensing restrictions in the market, only your company and;two others (Babba and Cabba) are allowed to operate in this market. The three;companies decide to form a cartel and divide the market shares such that each;company will provide services that will maximize its profits. The licensing;restrictions allow each company to sell as much as it wants at a price ceiling;of $2,200. You have the following output and MC data for each company;Output;MC ($);Q;Abba;Babba;Cabba;1,000;2,500;2,600;2,700;2,000;2,400;2,300;2,500;3,000;2,200;2,100;2,300;4,000;2,100;5,000;2,100;6,000;2,500;2,300;Calculate the industry output and market share at;the current price of $2,200, assuming the prices are stable and unlikely to;change.;Assume the current prices in the market are challenged by the;regulatory agency, resulting in a new maximum price of $2,000. How will;this change the industry output and market share for each company?;Is;there any incentive for any company to cheat under either of the;conditions in tasks a and b? Why or why not?


Paper#42413 | Written in 18-Jul-2015

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