The market for quits is initially competitive and the market demand is: P=400-0.4QD. The
Combined marginal costs of the firms in the quit industry are: MC=50+0.6Q.
a. Draw the demand, and marginal cost curves. Calculate and show how much these firms will sell and what they will charge.
b. Now a bunch of other firms buy out all of the quit producers and create a cartel (their combined MC doesn't change). How much will the cartel produce? What price will they charge? (Draw any necessary new curves on your graph above).
c. Is there any DWL associated with the cartel? If so, how much?
d. Now suppose one big firm comes and buys out all of the firms in the cartel. This monopoly somehow miraculously is able to perfectly price discriminate. How much will this firm produce? What will be the deadweight loss created by this monopoly?