4. (10 points) In a perfectly competitive industry, demand is:P = 850 - 2Qand industry supply

4. (10 points) In a perfectly competitive industry, demand is:

P = 850 - 2Q

and industry supply

is:

P = 250 + 4Q

a The supply is simply the sum of the marginal cost curves of all the firms in the industry. Suppose that all the competitive firms collude to form one single monopoly firm. (Collusion changes neither the demand nor the cost conditions in the industry.)

b Discuss the economic effects of the change in market structure. More specifically, quantify the possible changes in the market price and output of the commodity.