1. Consider the (inverse) market demand function for the market in streaming services. P = 120 - 4Q Assume further that the available technology results in Marginal Cost equal to $40. a) Graphically show the market outcome for monopoly, Cournot oligopoly and perfect competition. b) For monopoly, Cournot duopoly and perfect competition determine the optimal outcome. Clearly explain how you arrive at your answer. What are the market price and quantity under each market structure? c) What are the consumer surplus, producer surplus and total surplus under each scenario? d) Show the reaction function under Bertrand competition. What are the associated price and quantity?

1. Consider the (inverse) market demand function for the market in streaming services. P = 120 - 4Q Assume further that the available technology results in Marginal Cost equal to $40. a) Graphically show the market outcome for monopoly, Cournot oligopoly and perfect competition. b) For monopoly, Cournot duopoly and perfect competition determine the optimal outcome. Clearly explain how you arrive at your answer. What are the market price and quantity under each market structure? c) What are the consumer surplus, producer surplus and total surplus under each scenario? d) Show the reaction function under Bertrand competition. What are the associated price and quantity?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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QUESTION 10 Consider the markets studied in class: Bertrand duopoly, Cournot duopoly and Monopoly. Rank these markets in terms of their equilibrium price (P), total quantity produced in the whole market (Q) and deadweight loss (DWL). Select True of False for each of the following statements: 1-QBertrand PBertrand III - DWLCournot > DWLMonopoly
Assume that instead of having two firms in the market, we have a monopoly facing the inverse demand P = 400 − 10Q. The monopoly’s marginal cost is $10. Suppose the Monopoly can first degree price discriminate. Find (calculate) the Monopoly’s quantity, price, profit, the consumer surplus and thedeadweight loss in this case. Draw a representative graph here.
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1. Suppose there are two firms who are Cournot duopolists (set quantity simultaneously) in the wine business. The inverse demand for wine is given by P(Q) = 300 – 0.20. One firm has marginal costs of $45 and the other firm has marginal costs of S30. What is the total output produced in the market?
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