In a perfect competitive market, industry demand is P = 850 – 2Q, and industry supply is P = 250 + 4Q (supply is the sum of the marginal cost curves of the firms in the industry). Assume that all the firms collude to form a single monopoly firm. There is no change in the demand or cost conditions of the industry. What are the economic effects (price and quantity) of such a change in industry structure?

Question

In a perfect competitive market, industry demand is P = 850 – 2Q, and industry supply is P = 250 + 4Q (supply is the sum of the marginal cost curves of the firms in the industry).  Assume that all the firms collude to form a single monopoly firm. There is no change in the demand or cost conditions of the industry. What are the economic effects (price and quantity) of such a change in industry structure?

economyst · Answer

See my previous post on calculating the optimal quantity, then price. Compare that to the competitive case where supply=demand or 850-2Q=250+4Q -- solve for Q.