1.Cartel of two firms producing industrial diamonds is faced with the following demand function:

Q= 240 - 40*P.

Marginal cost and average total cost curves for each of the two firms is given by the following expressions: MC₁ = 4 + 0,2*Q₁iATC₁ = 4 + 0,1*Q₁

MC₂ = 2 + 0,2*Q₂iATC₂ = 2 + 0,1*Q₂.

a.Determine the optimal production for the cartel as a whole and prevailing diamond prices.

b. Determine production level for each firm which will minimize the costs for the cartel.

c. For each firm calculate total profit, unit profit and total profit for the cartel.