The industry demand function for bulk plastics is represented by the following equation:

P$=1,60040$QP$=1,60040$Q

where Q represents millions of pounds of plastic. The total cost function for the industry, exclusive of a required return on invested capital, is

TC$=300+1,000$Q$+20$Q$2$TC$=300+1,000$Q$+20$Q$2$

If this industry acts like a monopolist in the determination of price and output, the profit$-$maximizing level of price and output will be

$$and

million$$ respectively.

The total profit at this price$-$output level is

million.

Assume that this industry is composed of many $(500)$ small firms, such that the demand function facing any individual firm is P$=$$$1,240$P$=$$$1,240.$

Under these conditions, the profit$-$maximizing level of price and $($total industry$)$ output will be

$$and

million$$ respectively. $($Hint: The industry$$s total cost function remains unchanged.$)$

The total profit at this price$-$output level is

million.

Because of the risk of this industry, investors require a $15$ percent rate of return on investment. Total industry investment amounts to $$4$ billion. If the monopoly solution prevails, the total industry profit is

million.

If the competitive solution most accurately describes the industry, which of the following is most likely to happen?

Some firms will exit the market.

New firms will enter the market.

Number of firms remains unchanged.

Suppose the Clean Water Coalition proposes pollution control standards for the industry that would change the industry cost curve to the following:

TC$=400+1,060$Q$+20$Q$2$TC$=400+1,060$Q$+20$Q$2$

What is the impact of this change on price, output, and total profits under the monopoly solution?

Increase

Decrease

No change

Price

Output

Total Profits