Cornell Pharmaceutical, Inc., and Penn Medical, Ltd., supply generic drugs to treat a wide variety of illnesses. A major product for each company is a generic equivalent of an antibiotic used to treat postoperative infections. Proprietary cost and output information for each company reveal the following relations between marginal cost and output:

MC_C = $10 + $0.004Q_C. (Cornell)

MC_P = $8 + $0.008Q_P. (Penn)

The wholesale market for generic drugs is vigorously price competitive, and neither firm is able to charge a premium for its products. Thus, P = MR in this market.

A. Determine the supply curve for each firm. Express price as a function of quantity and quantity as a function of price. (Hint: Set P = MR = MC to find each firm’s supply curve.)

B. Calculate the quantity supplied by each firm at prices of $8, $10, and $12. What is the minimum price necessary for each individual firm to supply output?

C. Assuming these two firms make up the entire industry, determine the industry supply curve when P < $10.

D. Determine the industry supply curve when P > $10. To check your answer, calculate quantity at an industry price of $12 and compare your answer with part B.