Question: 1. Suppose two films compete by simultaneously choosing quantity (Coumot competition). The inverse demand curve for widgets is P + 24 and each film

1. Suppose two films compete by simultaneously choosing quantity (Coumot competition). The inverse demand curve for widgets is P + 24 and each film has the same costs Cl(ql) = 6q1 and C2(q2) = 6q2. a. What is the monopoly quantity? b. What is the best-response function for film 2? c. \Vhat are the Cournot equilibrium quantities, qt and q'2 ? d. What is the Cournot equilibrium price? e. \Vhat are the Cournot equilibrium profits for one of the films? 2. Once again. suppose two firms compete by simultaneously choosing quantity (Cournot competition). The inverse demand curve for widgets is P + 24 and each film has the same costs Cl(ql) = 6q1 and C2(q2) = 6q2. a. Calculate the Stackelberg (Leader Follower) equilibrium quantities. b. Calculate the Stackelberg equilibrium price. c. Calculate the Stackelberg equilibrium profits. 3. Suppose two films that sell a homogeneous product and each finn has the same costs TC 12Q. The films compete by simultaneously choosing prices (Bertrand competition). The inverse demand curve for Midgets is P = Q + 50. a. \Vhat are the Bertrand equilibrium prices, p1 anclp2*? b. How many units Mill be sold to consumers at the Beltrand equilibrium? (HINT: Plug the lowest price that will be sold in the inverse demand function.) c. \Vhat are the Bertrand equilibrium profits for one of the finns assuming that they split the market (receive equal market share) when they charge equal prices?

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