Question: The can industry is composed of two firms. Suppose that the demand curve for cans is
P = 100 – Q
where p is the price (in cents) of a can and Q is the quantity demanded (in millions per month) of cans. Suppose that the total cost function of each firm is
TC = 2 + 15q
where TC is total cost (in tens of thousands of dollars) per month and q is the quantity produced (in millions per month by the firm.
a) What is the output if the firms set price equal to marginal cost?
b) What is the price charged to the market if the firms collude and act like a monopoly?
Deliverables: Word Document