Answer:
<u>The net gain for the firm cheating the cartel is US$ 183 million (rounding the answer to the nearest million).</u>
Explanation:
1. Let's review all the information provided for solving this case:
Number of firms that supply Whatailsya energy drink = 6
Amount of production of the cartel of six firms = 500 million units
Price of the energy drink = US$ 5
Amount of production of the firm that decided to break the cartel = 50 million extra units
Price after the extra production is sold = US$ 4.50
2. Let's find the individual production of each firm before and after the 50 million extra units and the net gains for the cheating firm.
Individual production of each firm of the cartel = Amount of production of the cartel/Number of firms
Individual production of each firm of the cartel = 500 million units/6
Individual production of each firm of the cartel = 83.33 million units
Individual sales of each firm before the 50 million extra units = Individual production * Price of the energy drink
Individual sales of each firm before the 50 million extra units = 83.333 million * 5
Individual sales revenue of each firm before the 50 million extra units = US$ 416.666 million
New production amount of the firm cheating the cartel = 83.333 + 50
New production amount of the firm cheating the cartel = 133.333 million units
Price of the energy drink after the extra production is sold = US$ 4.50
New sales revenue of the firm cheating the cartel = New production amount * Price of the energy drink after the extra production is sold
New sales revenue of the firm cheating the cartel = 133.333 million * 4.50
New sales revenue of the firm cheating the cartel = US$ 600 million
Net gain of the firm cheating the cartel = New sales revenue of the firm cheating the cartel - Individual sales of each firm before the 50 million extra units
Net gain of the firm cheating the cartel = 600 million - 416.666 million
Net gain of the firm cheating the cartel = 183.333 million
<u>Net gain of the firm cheating the cartel = US$ 183 million (rounding the answer to the nearest million)</u>
