Market demand be given by the inverse demand curve

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Let market demand be given by the inverse demand curve P = 50 − 2Q, where Q = q1 + q2, q1 is firm 1’s output level and q2 is firm 2’s output level. The cost function for firm 1 is T C1 = 2q1 , and for firm 2 is T C2 = 2q2 . Firms are Cournot competitors. (a) (15 points) Find each firm’s output, price and profit (b) (10 points) Graph each firm’s best response function. Show the Cournot equilibrium (c) (15 points) What are the profit-maximizing price and output if the two firms collude and act like a monopolist? Discuss why consumers are worse-off in this case (d) (20 points) Suppose that firm 2 enters the market slightly sooner that firm 1, i.e., firm 2 is the first-mover, find each firm’s output, price and profit in this Stackelberg model. Identify the first-mover advantage

Reference no: EM131076628

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