Comparison between the perfectly competitive profit, monopoly profit and cartel profit.
An industry has ten identical firms, each with a constant marginal cost of 20. (Fixed costs are zero) The market demand function is X=200 4P, where P is the market price and X is the total amount demanded.
A . If the industry is competitive, what will be the equilibrium price, the total amount demanded, the amount produced by each firm, and the profit of each firm?
B. The ten firms have banded together to form a cartel, and the cartel sets the monopoly price. The cartel agreement limits each firm to an output of one-tenth of the total amount demanded at the cartel price. What price will be charged? Illustrate what will be the total amount demanded also the amount produced by every firm, and the profit of each firm?