In 1974, the US Justice Department filed an antitrust lawsuit against AT&T and both parties agree to a consent decree that AT&T would relinquish control of their monopoly of telephone services in 1982. This consent decree took effect in 1984 and the Bell System was broken apart into seven independent companies called the "Baby Bells." Assume that the "Baby Bells" competed against each other in the long-distance telephone services under the conditions of perfect competition and that each firm's individual marginal cost curve was identical (essentially, take the marginal cost curve in the figure as the aggregate supply curve for all the Baby Bells):

Long Distance Phone Calls in 1985 Long Distance Phone Calls in 1985 $10 (Aggregate Market) $10 (Individual Firm) $9 Marginal Cost Curve $9 Marginal Cost Curve $8 $8 $7 $7 Isoprofit Curve A $6 $6 Isoprofit Curve B Price Price $5 $5 Average Cost Curve $4 $4 $3 $3 $2 $2 $1.25 $1.25 $1 $1 Demand Curve Demand Curve 0 0 2 4 6 8 10 12 14 16 18 20 22 24 0 0.3 0.6 0.9 1.1 1.4 1.7 2.0 2.3 2.6 2.9 3.1 3.4 Quantity (in hundreds of thousands of calls) Quantity (in hundreds of thousands of calls)