Computation of profit maximizing level of output, the price, the maximum profits also the price elasticity at the optimal output.
In 1991, Brazil also Columbia united to form a coffee cartel also reduce coffee output. Suppose total costs for the cartel are:
TC = 12 + 5Q + Q2
Here Q is millions of pounds of coffee. The marketplace demand curve for coffee is:
P = 17 - Q
Here P is millions of dollars per million pounds. Suppose before the cartel was formed, output was 11 million pounds. In the Wall Street Journal a Columbian delegate to the cartel said which he believed which if the cartel reduced coffee output by 10%, the price would rise by 20%.
Compute your price elasticity of demand based on the Columbian Delegates belief.
Given this price elasticity-Illustrate what is the anticipated change in price as the result of an 10% decrease in output (remember monopolists also oligopolists control output not price; price is the result of output also demand)