Assume that it is only possible to have one size of plant and there are 100 firms in an industry, all wiThidentical cost conditions. Each faces the marginal cost schedule MC = XXXXXXXXXX05q where MC...

Assume that it is only possible to have one size of plant and there are 100 firms in an industry, all wiThidentical cost conditions. Each faces the marginal cost schedule MC = 1.5 + 0.05q where MC is marginal cost (in £) and q is the firm's output. What would the equilibrium price ( P) and the quantity produced by each firm be if they acted as firms in perfect competition (but wiThno new entry) and the market demand (Ui) was given by the relationship below?

OA = 5000 - 1000P.

If they formed a cartel what would be the joint profit maximising price and how much would each firm produce assuming that they split the industry output equally? Under these cartel arrangements, what output would one firm be tempted to produce if it knew it could exceed its quota without the others' knowledge?