11) Industry demand for a good is given by: P = 60 - .5Q. The industry?s long-run cos
is $10 per unit: LAC = LMC = $10.
a. A monopolist controls the industry. Find its output and price.
b. Instead, suppose that the same industry is perfectly competitive. Find the
long-run equilibrium price and output. Comment on the differences between the
monopoly and competitive results.
12) A 5-member commodity cartel faces the demand curve: P = 60 - .4Q. Each
member can produce output at (constant) LAC = LMC = $20 per unit.
a. Describe how the cartel should operate to maximize its total group profit.
b. Under the group profit-maximizing cartel agreement in part a, one member
produces 10 units of output. It is tempted to secretly increase its output to 20
units. Assess this strategy and comment on cartel stability.
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