A two - firm cartel producing industrial diamonds faces the following demand function;
Q = 120 - 10P or P = 12 - 0.1Q
The marginal cost and average total cost functions of each firm are, respectively,
MC1 = 4 + 0.2Q1 and ATC1 = 4 + 0.1Q1
MC2 = 4 + 0.2Q2 and ATC2 = 4 + 0.1Q2
Draw a figure showing the best level of output and price for the cartel, and the output of each firm to minimize the total costs of production for the cartel. Calculate the profits per unit and in total for each firm.