Suppose that there are two firms in a duopoly market, Firm A and Firm B. Both...

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Suppose that there are two firms in a duopoly market, Firm A and Firm B. Both firms have the same cost structure, which is given by the following table: Quantity | Average Cost 0 | $100 1|$90 21 $80 31 $70 41 $60 The market demand for the product is given by the following inverse demand curve: P = $100-Q where P is the price of the product and Q is the quantity of the product. The firms can choose to produce any quantity from 0 to 4, and they can choose to collude or compete. 1. If the firms collude and act as a monopoly, what is the profit-maximizing price and quantity? 2. If the firms collude and act as a monopoly, what is the total profit for the market? 3. If the firms compete in a Cournot duopoly, what is the profit-maximizing quantity for each firm? 4. If the firms compete in a Cournot duopoly, what is the price that will result in the market? 5. If the firms compete in a Cournot duopoly, what is the total profit for the market? 6. Compare the total profit in the monopoly and Cournot duopoly cases. What can you conclude about the effect of competition on total profit in this market? Suppose that there are two firms in a duopoly market, Firm A and Firm B. Both firms have the same cost structure, which is given by the following table: Quantity | Average Cost 0 | $100 1|$90 21 $80 31 $70 41 $60 The market demand for the product is given by the following inverse demand curve: P = $100-Q where P is the price of the product and Q is the quantity of the product. The firms can choose to produce any quantity from 0 to 4, and they can choose to collude or compete. 1. If the firms collude and act as a monopoly, what is the profit-maximizing price and quantity? 2. If the firms collude and act as a monopoly, what is the total profit for the market? 3. If the firms compete in a Cournot duopoly, what is the profit-maximizing quantity for each firm? 4. If the firms compete in a Cournot duopoly, what is the price that will result in the market? 5. If the firms compete in a Cournot duopoly, what is the total profit for the market? 6. Compare the total profit in the monopoly and Cournot duopoly cases. What can you conclude about the effect of competition on total profit in this market?

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