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

P=80020Q

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+500Q+10Q

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=$620P=$620.

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 $2 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? Select only one answer.

New firms will enter the market.

Some firms will exit 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+560Q+10Q

What is the impact of this change on price, output, and total profits under the monopoly solution? Mark appropriately or all that apply.

	Increase	Decrease	No change
Price
Output
Total Profits