Explore BrainMass

Explore BrainMass

    Determining an optimal allocation of output

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    An illegal cartel has been formed by three leading ready-mix cement suppliers in the local market. Total costs at various levels of service per day are as follows:

    Total Cost ($000)
    Daily Output
    (000 cu. yds.) Ready Mixes, Inc. Concrete ProductsCo. Hard Stuff, Inc.
    0 $ 2 $ 3 $ 0
    1 12 14 8
    2 21 23 17
    3 29 30 27
    4 36 41 38
    5 47 53 50

    A. Construct a table showing the marginal cost of production per firm.

    B. From the data in part A, determine an optimal allocation of output and maximum profits if the cartel sets Q = 10(000) and P = $10.

    C. Is there an incentive for individual members to cheat by expanding output when the cartel sets Q = 10(000) and P = $9?

    © BrainMass Inc. brainmass.com March 4, 2021, 11:02 pm ad1c9bdddf
    https://brainmass.com/economics/price-levels/determining-an-optimal-allocation-of-output-387205

    Attachments

    Solution Preview

    Please refer attached file for better clarity of tables.

    A. Construct a table showing the marginal cost of production per firm.

    Total Cost ($000)
    Daily Output Ready Mixes, Inc. Concrete ProductsCo. Hard Stuff, Inc.
    (000 cu. yds.) Total Cost MC ($/cu yard) Total Cost MC ($/cu yard) Total Cost MC ($/cu yard)
    0 $2 $3 $0
    1 12 10 14 11 8 8
    2 21 9 23 ...

    Solution Summary

    Solution describes the steps to determine an optimal allocation of output and maximum profits in the given scenario.

    $2.49

    ADVERTISEMENT