2. Two cartel companies that produce gems face a demand function:

Q = 120 - 10P or P = 12-0.1Q

With the function of marginal cost and average total cost:

MC1 = 4 + 0.2Q and ATC1 = 4 + 0.1Q1

MC2 = 2 + 0.2Q and ATC2 = 2 + 0.1Q2

a. Draw a curve showing the level of output and the best price for the cartel firm?

b. What is the output value of each company with a minimum total cost of production?

c. Calculate the profit for each unit and the overall profit for each company?

Hint: Centralized Cartel Model