____________

Price

(dollars per unit)

Quantity demanded

(units)

30

0

25

10

20

20

15

30

10

40

5

50

0

60

1.The table above has the market demand schedule in an industry that has two firms in it. The marginal cost of this product is zero because these two firms have exclusive ownership of the resource and it does not cost any additional amount to produce additional units. (6 marks)

a)If the firms cooperate with each other so that they operate as a monopoly, what price will they charge and what (total) output will they produce?

b)If the firms cannot cooperate but instead behave as perfect competitors, what will be the price and the (total) output they produce?