The industry demand is P(y) = 14 – 2y. There are two firms with cost functions C1(y1) = 0 and C2(y2) = 0, respectively.

a) Find the Cournot equilibrium: quantities, prices, profits, and total surplus.

b) Suppose now that the two firms are owned by the same owner. Find  the quantity, price, profit, and surplus. Compare your findings to the  magnitudes in part (a).

c) Find the maximal surplus possible in this industry. Point out two  different sources of inefficiency which makes this total surplus in part (a) smaller.