solution

The Bergen Company and the Gutenberg Company are the only two firms

that produce and sell a particular kind of machinery. The demand curve for

their product is P = 580 – 3Q

where P is the price (in dollars) of the product, and Q is the total amount

demanded. The total cost function of the Bergen Company is

TCB = 410QB where TCB is its total cost (in dollars) and QB is its output. The total cost function

of the Gutenberg Company is TCG = 460QG

where TCG is its total cost (in dollars) and QG is its output.

a. If these two firms collude and they want to maximize their combined

profit, how much will the Bergen Company produce?

b. How much will the Gutenberg Company produce?

c. Will the Gutenberg Company agree to such an arrangement? Why or

why not?