Natural Resources Homework #3

 

Instructions:

 

Homework assignments are optional – there is no penalty for not completing an assignment.

 

If you like, you can work with other students in the class. Just turn in one assignment per group and include all names.

 

Each student can earn up to 1 point per homework. The point will be added to the first exam score.

 

E-mail your work to the class TA: Shan Zhou (shan.zhou@colorado.edu).

Or you can turn in the work at the beginning of class.

 

The deadline to submit your work is at the beginning of class on Monday, Oct. 26th.

 

If you have any questions please ask at the beginning of class.

 

Assume a cartel with 4 participating companies.

 

1) What is the optimal strategic behavior for each of the participating firms and what is their goal?

 

 

 

 

 

 

 

2) What is the price elasticity of demand and why is it important for a firm to consider?

 

What happens to the elasticity over time?

 

 

 

 

 

 

 

 

3) Over time, suggest two events that could destroy cartel harmony.