Price (dollars per unit) Quantity demanded (units) 30 0 25 10 20 20 15 30 10 40

Question

Price (dollars per unit) Quantity demanded (units) 30 0 25 10 20 20 15 30 10 40 5 50 0 60 6) The table above has the market demand schedule in an industry that has two firms in it. The marginal cost of this product is zero because these two firms have exclusive ownership of the resource and it does not cost any additional amount to produce additional units. a) If the firms cooperate with each other so that they operate as a monopoly, what price will they charge and what (total) output will they produce? b) If the firms cannot cooperate but instead behave as perfect competitors, what will be the price and the (total) output they produce?

Explanation / Answer

price units revenue
30 0 0
25 10 250
20 20 400
15 30 450
10 40 400
5 50 250
0 60 0

a) in a monopoly, the revenue is maximized, so they price it at 15 and the total production is 30 units = $450

b) without cooperation, at perfect competition, there is equilibrium where marginal cost = price

here marginal cost = 0, so the price will be zero and the total produce is 60 units

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