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QUESTION

A two - firm cartel producing industrial diamonds faces the following demand function; Q = 120 - 10 P or P = 12 - 0.

ATC2 = 4 + 0.1Q2

Draw a figure showing the best level of output and price for the cartel, and the output of each firm to minimize the total costs of production for the cartel. Calculate the profits per unit and in total for each firm.

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