Consider a monopolistically competitive market for good X produced by firm A facing a demand function

=10003.

Firm A's marginal cost and average total cost at a production level are respectively

=4 and =40000+4.

1. a)What is the short-run economic profit or deficit for firm A? (4 marks)
2. b)Your student comments that in the long run firm A will earn zero economics profit, and therefore there is no deadweight loss in this market. Do you agree? Explain briefly in terms of the concept of Pareto efficiency. (4 marks)

Now, the market for good X is changed into an oligopoly market. And good X is produced by firm A and B, which face a demand function

=10005.

Firm A's marginal cost and average total cost at a production level are respectively

=4 and =400+4.

Firm B's marginal cost and average total cost at a production level are respectively =6 and =600+6.

3.c) What is the market supply curve for good X? (1 mark)

4.d)What is the market price and market output for good X if firm A and B cooperates as a cartel? (2 marks)

5.e)What is the output and profit of firm A and B respectively, if they cooperate as a cartel? (4 marks)