Determining cartels-profit maximizing outputs

Reference no: EM1370450

Company A and Company B are soft drink companies operating in the same country for two decades. The market demand curve for their soft drinks is given by Q = 119 - 0.5P. Company A's short-run and marginal costs are given by STC = 3q2 + 48q + 572 and SMC = 6q + 48. Company B's short run total and marginal costs are given by STC = 6q2 + 18q + 849 and SMC = 12q + 18.

a. If Company A and Company B form a cartel to market soft drinks, calculate the cartels profit maximizing price quanity combination.

b. Compute the profit maximizing output produced by each firm.

c. Compute the profits earned by each firm and the cartel.

Reference no: EM1370450

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