There are only two firms in an industry with demand curves q₁ = 30 - P and q₂ = 30 - P.Both have no fixed costs and each has a marginal cost of 10 per unit produced.If they behave as profit-maximizing price takers,each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits.If they formed a cartel and split the production of the output evenly,the economic profit of each firm would be

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When the two firms behave as price-takers and produce 20 units each, they each earn zero economic profits. At this production level, the market price is $10, which is equal to the marginal cost of production. 
If they were to collude and form a cartel, they would split the total output of 40 units evenly between themselves. To maximize their joint profits, they would need to set a monopoly price and restrict output to a total of 20 units. 
At a price of $20, the total revenue for the cartel would be $400. Total costs would be $200 (20 units produced by each firm at a marginal cost of $10 per unit). Therefore, the economic profit for each firm would be $100 ($400 total revenue - $200 total costs)/2 = $100. Thus, the best choice is C.

There Are Only Two Firms in an Industry with Demand