In a perfectly competitive industry, demand is:P = 850-2Q and industry supply is

Question

In a perfectly competitive industry, demand is:P = 850-2Q
and industry supply is: P 250 + 4Q
The supply is simply the sum of the marginal cost curves of all the firms in the industry. Suppose that all the competitive firms collude to form one single monopoly firm. (Collusion changes neith the demand nor the cost conditions in the industry.) Discuss the economic effects of the change in market structure. More specifically, explain the possible changes in the market price and output of the commodity.

Explanation / Answer

In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it, and monopolies typically produce fewer goods and sell them at higher prices than under perfect competition to maximize their profit at the expense of consumer satisfaction So, should this event happen, there would be a large consolidation in suppliers, and a consequent reduction in supply, causing a drastic increase in price (due to the supply curve shifting to left). Please let me know if you need any additional help! Kyle

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