Oligopoly and Game Theory: End of Chapter Problem a. Let’s look at the market for one kind of apple: Gala. Assume that there are 300 producers of Gala apples and that MC=AC=$0.40 per pound . In a competitive market, price is driven down to marginal cost. Let’s assume that when P=MC , each apple grower produces 2 million pounds of apples for a total market production of 600 million pounds. Now imagine that the apple growers form a cartel and each agrees to cut production to 1 million pounds, which drives the price up to $0.70 per pound.
Calculate profit per pound and total industry profit if the apple growers behave as if they were a monopoly and are able to produce 300 million pounds of apples at a price of $0.70 per pound. profit per pound: $ total industry profit: $ million
b. If a single apple grower broke from the cartel and produced an extra million pounds of apples, the approximate additional profit this apple grower would make is $ 300,000. 600,000. 0.30. 90,000,000.
