A Cournot industry is made up of 4 firms. Market demand is given by

p = 200 - y1 - y2 - y3 - y4. All firms have a marginal cost of production of $ 8.

a) Using the general formulas of the Cournot model, find the profit of each firm at equilibrium, the output of each firm, the market price and the total output of the industry.

b) Firms 1, 2 and 3 form a cartel, while firm 4 remains a non-member (outsider). After the formation of the cartel:

i) Find the output of each cartel member at equilibrium.

ii) Find the equilibrium price.

iii) Find the profit of each member of the cartel.

iv) Find the production and profit of the firm 4.

c) Is the cartel profitable for its members (compared to your answer in (a))?

d) How much does the profit of the non-member increase with the formation of the cartel?