20.07.2022 - 20:49

Adi and Jill are the only doctors in a small Pennsylvania town who offer LASIK eye surgery. The table provides the demand schedule for eye surgeries in this town. Each doctor faces a constant marginal

Question:

Adi and Jill are the only doctors in a small Pennsylvania town who offer LASIK eye surgery. The table provides the demand schedule for eye surgeries in this town. Each doctor faces a constant marginal cost of $50 to perform the surgery; there are no fixed costs.

price (dollars) quantity
500 3
450 4
400 5
350 6
300 7
250 8
200 9
150 10
100 11
50 12

If Adi and Jill collude to achieve the monopoly outcome, how many surgeries should each doctor perform? Assume they split the output evenly.

Answers (0)
  • Marion
    April 13, 2023 в 22:45
    If Adi and Jill collude to achieve the monopoly outcome, they should each perform 6 eye surgeries. This is because they would want to maximize their joint profits, which would be highest at a price of $350, where the total quantity demanded is 12 surgeries. At this price, each doctor would perform 6 surgeries, resulting in a total cost of $600 ($50 marginal cost x 12 surgeries). The total revenue earned would be $4,200 ($350 price x 12 surgeries), resulting in a total profit of $3,600 ($4,200 revenue - $600 cost), which they would split evenly. This is in contrast to competing with each other, where they would both perform fewer surgeries and earn lower profits.
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