The problem describes a scenario where two similar firms form a perfect cartel to maximize their profits. We are given a graph showing the demand curve, marginal revenue (MR) curve, and marginal cost (MC) / average total cost (ATC) curve. We need to determine the total quantity produced by the cartel, the price charged per unit, and the profit earned by each firm.

1. Problem Description

The problem describes a scenario where two similar firms form a perfect cartel to maximize their profits. We are given a graph showing the demand curve, marginal revenue (MR) curve, and marginal cost (MC) / average total cost (ATC) curve. We need to determine the total quantity produced by the cartel, the price charged per unit, and the profit earned by each firm.

2. Solution Steps

To maximize profit, the cartel will produce where marginal revenue (MR) equals marginal cost (MC). From the graph, the intersection of MR and MC occurs at a quantity of

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Total quantity produced by the cartel: $Q_{total} = 40$

The price corresponding to this quantity on the demand curve is $

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Price: $P = 60$

The average total cost (ATC) is equal to the marginal cost (MC), which is

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0. The formula for total revenue (TR) is:

$TR = P \times Q$

$TR = 60 \times 40 = 2400$

The formula for total cost (TC) is:

$TC = ATC \times Q$

$TC = 20 \times 40 = 800$

The formula for total profit is:

$Profit_{total} = TR - TC$

$Profit_{total} = 2400 - 800 = 1600$

Since there are two similar firms, each firm produces half of the total quantity and earns half of the total profit.

Quantity per firm: $Q_{firm} = \frac{40}{2} = 20$

Profit per firm: $Profit_{firm} = \frac{1600}{2} = 800$

So, the cartel will produce 40 units, charge a price of $60 per unit, and each firm will earn a profit of$

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3. Final Answer

The firms will produce 40 units per day and charge a price of $60 per unit. Given this information, each firm earns a profit of$

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0. The correct option is a. Q=40, P=$60, Profit = $800