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What is the monopolist optimal price and quantity

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Reference no: EM132422626

The following questions ask you to analyze the outcomes in a market with different structures.

(a) Suppose that in the city X there is only one firm supplying a given good. Let's call this firm A. The market demand for that good is P = 250 2.5Q and the total cost is T CA = 50QA.

i. What is the monopolist's optimal price and quantity?

ii. What are the monopolist's profits?

(b) To increase the competition in the market, the major of city X allows the entry of a new competitor (firm B). Firm B has the same cost function as firm A. Suppose that firm A and B compete as Cournot duopolists.

i. Describe the Cournot equilibrium (price, individual quantity, and market's quantity)

What are the profits for the duopolists?

(c) Now assume the firms agree to cooperate and behave as a cartel. i. Describe the Cartel equilibrium (price, individual quantity, and market's quantity)

ii. What are the profits for firm A and B

Reference no: EM132422626

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