A particular segment of the medical device industry is dominated by a handful of

Question

A particular segment of the medical device industry is dominated by a handful of firms. These firms have combined into an effective cartel. All firms in the cartel have the same cost structure with zero fixed costs and each has constant marginal cost of $4,000 (therefore, the industry MC is also constant at $4,000). The demand relation in this industry segment is: Qd = 100,000 - 20P (Demand)

Answer
1) The profit-max level of output for the cartel is:
2) The profit-max price for the cartel is:
3) Profits earned by the cartel are:
4) Assume the cartel collapses and competition sets in the industry.The competitive profit-maximizing level of output is:
5) The competitive profit maximizing price is:

Answer's:
A. $5,000
B. $4,000
C. $3,000
D. 25,000
E. $4,500
F. $5,000,000
G. Cannot be determined
H. 10,000 Units
I. $0
J. $12,500
K. $7,500,000
L. 20,000 units

Explanation / Answer

2) The profit-max price for the cartel is: K. $7,500,000

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