Smalltown has 140 residents and two firms, AT&T, Verizon, service the town's residents for their cell phone service with unlimited anytime minutes and free phone. Each firm has a $0 fixed cost and a constant $10 marginal cost.
Referring to Smalltown’s demand schedule for cell phone service depicted in the table below, please answer the following questions.
If both firms agree to produce Q = 30 (collusion), how much profit does each firm make? Answer = $ __.
If AT&T reneges on the agreement and produces Q = 40 (while Verizon still produces Q = 30), what is the new market price? Answer = $ __.
If AT&T reneges on the agreement and produces Q = 40 (while Verizon still produces Q = 30), what are AT&T’s new profits? Answer = $ __.
If both firms renege on their agreement to produce Q = 30 and instead produce Q = 40, determine each firm’s (identical) profits. Answer = $ __t.