Question

A two-firm cartel producing industrial diamonds faces the following demand function:

Q = 350 -5P or (reverse demand function)   P = 70 -.2Q

The marginal cost functions of each firm are, respectively:

MC₁ = 10 + .5Q₁

MC₂ = 10 + (1/3)Q₂

Determine the single price charged by the cartel, the total quantity sold, and the quantity produced by each cartel participant

Answer 1