Two firms in a particular industry face a market demand curve given by the equation P= 80 - 0

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Two firms in a particular industry face a market demand curve given by the equation P= 80 - 0.25Q. The marginal cost is $40 per unit and the marginal revenue is MR= 80 - 0.5Q.

a) Draw the demand curve to scale on a diagram, and then insert the corresponding marginal revenue curve and the MC curve. Note: When calculating your points, please round the numbers to the nearest whole number.

b) If these firms got together to form a cartel, what output would they produce, and what price would they charge? (If necessary round your answers to two decimal places.)

Output of Cartel =

Selling Price =

c) If one of the producers now decides to sell more additional units, thereby violating the cartel agreement, what effect will be observed on the other producer's profit?

The other producer's profit will: Increase or Decrease?