-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?
Definitions:
Optimal Level
The most efficient, effective, or desirable point or degree for a specific outcome or condition.
Monopolistically Competitive
Pertains to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and product differentiation.
Positive Economic Profits
Occur when a firm's total revenues exceed all its costs, including both explicit and implicit costs, indicating superior performance or a competitive advantage.
Short Run
A period during which at least one input, such as plant size, is fixed and cannot be varied.
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