{"id":124400,"date":"2022-01-26T10:49:43","date_gmt":"2022-01-26T10:49:43","guid":{"rendered":"https:\/\/essayparlour.com\/custom-essays\/?p=124400"},"modified":"2022-01-26T10:49:43","modified_gmt":"2022-01-26T10:49:43","slug":"suppose-in-the-previous-problem-that-gaston-can-produce-souffles","status":"publish","type":"post","link":"https:\/\/essayparlour.com\/custom-essays\/business-economics-2\/suppose-in-the-previous-problem-that-gaston-can-produce-souffles\/","title":{"rendered":"Suppose in the previous problem that Gaston can produce souffl\u00e9s"},"content":{"rendered":"<table style = 'table-striped table-bordered table-hover' responsive='true'>\n<tr>\n<th>Question<\/th>\n<\/tr>\n<tr>\n<td>Suppose in the previous problem that Gaston can produce souffl\u00e9s at a constant marginal cost of $5, but Pierre produces souffl\u00e9s for $7. Together, they collude to produce three units each.<br \/>\n a. How much profit will each producer earn? What will be the total profit of the cartel?<br \/>\n b. Gaston observes that he is a more efficient producer than Pierre, and suggests that if they are going to produce six units, the cartel&#8217;s interests are better served if Gaston produces all of the souffl\u00e9s.<br \/>\n i. If Gaston produces and sells all of the souffl\u00e9s and Pierre produces nothing, what happens to the profit of the cartel?<br \/>\n ii. Is Pierre likely to agree not to produce any souffl\u00e9s?<br \/>\n iii. Suppose Gaston offers to pay Pierre not to produce any souffl\u00e9s. How much would Gaston potentially be willing to offer? What is the minimum offer that Pierre should accept?<br \/>\n iv. Suppose that the deal in part (iii) is reached for Pierre&#8217;s minimum price. What happens to Pierre&#8217;s profit if he cheats on his agreement with Gaston and increases his output from zero souffl\u00e9s to one? What happens to Gaston&#8217;s profit?<br \/>\n v. Compare Pierre&#8217;s incentive to cheat under this arrangement with the incentive that exists when they split production equally. Also compare Gaston&#8217;s vulnerability to Pierre&#8217;s cheating under both arrangements. Why might this cartel choose to use the less-profitable method of each member producing three units to the potentially more-profitable method of having Gaston produce everything?<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>Question<\/p>\n<p>\nSuppose in the previous problem that Gaston can produce souffl\u00e9s at a constant marginal cost of $5, but Pierre produces souffl\u00e9s for $7. Together, they collude to produce three units each.<br \/>\n a. How much profit will each producer earn? <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[],"class_list":["post-124400","post","type-post","status-publish","format-standard","hentry","category-business-economics-2"],"_links":{"self":[{"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/posts\/124400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/comments?post=124400"}],"version-history":[{"count":1,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/posts\/124400\/revisions"}],"predecessor-version":[{"id":124401,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/posts\/124400\/revisions\/124401"}],"wp:attachment":[{"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/media?parent=124400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/categories?post=124400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/essayparlour.com\/custom-essays\/wp-json\/wp\/v2\/tags?post=124400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}