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 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 are the price and output if managers set price equal to marginal cost?
b) What are the profit - maximizing price and output if the managers - collide and act like a monopolist?
c) Do the managers make a higher combined profit if they collide than if they set price equal to marginal cost? If so, how much higher is their combined profit?