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The market for qbits is initially competitive and the market demand is: P = 400 – 0.4QD .  The combined marginal costs of the firms in the qbit industry are: MC = 50 + 0.6Q .

a. Calculate and show how much these firms will sell and what they will charge.


At Profit maximization in competitive market,


=50+.6Q =400-.4Q

Q = 350/1 = 350 units

Price charge = 400-.4*350 =260

b) In case of monopoly, maximum profit occurs at MR = MC

In the above numerical, P = 400 – 0.4QD .

Total Revenue = P*Q



MR = d®/d(Q)  = 400-.8Q

So at Profit maximization,


400-.8Q = 50+.6Q

So, Q =250 units

P= 50+.6*250 =210
c) Is there any DWL associated with the cartel?  If so, how much?

Yes there is DWL and it is given as DWL = (Change in quantity)* Change in price




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