2. 1 COLLUSIVE OLIGOPOLY Profit-maximising cartel Price The total market demand urve is shown with th P corresponding market MR curve. The cartel,s Industry MO curve the M horizontal sum of the mc curves of its members This is because we are adding the output of each of the cartel members at h level of m Industry cost Profits D=AR maximized at Q where Industry MC=MR. The cartel wil Q MR Quantity therefore set a price of p t which o will be Figure 1. profit-maximizing demanded cartel2. 1 COLLUSIVE OLIGOPOLY P Profit-maximising cartel The total market demand curve is shown with the corresponding market MR curve. The cartel’s MC curve is the horizontal sum of the MC curves of its members. This is because we are adding the output of each of the cartel members at each level of marginal cost. Profits are maximized at Q where MC=MR. The cartel will therefore set a price of P at which Q will be demanded. 0 Q Quantity Industry MR Industry D=AR Industry MC Price Figure 1. Profit-maximizing cartel