1.2 The market demand for a month’s supply of a generic medicine is Qd = 600 - 0.5P. The demand can be rewritten as P = 1200 - 2Q, so that the marginal revenue is MR = 1200 - 4Q.

The marginal cost (MC) and average total cost

(ATC) are constant, and both equal $60. Consequently, the supply curve is P = MC = $60.

a. If the firms’ managers compete, what quantity is produced, what is the price, and what is the total economic profit made by all of the firms combined?

b. If the firms’ managers form a price-fixing cartel that maximizes the firms’ total profit, what total combined quantity do the firms produce, what price do they set, and what is the total combined economic profit made by the firms?

c. Suppose that the managers have formed the price-fixing cartel described in part

b. If one firm increases its production by one unit and the price does not change, what is the change in that firm’s economic profit?