1. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 960-6Q. Each firm produces at a constant marginal cost of $60 and has no fixed costs. a. Assuming perfect competition, compute i. Equilibrium price and quantity ii. Profits and producer surplus iii. Consumer surplus and total surplus
1. Two firms compete in a market to sell a homogeneous product with inverse
demand function P = 960-6Q. Each firm produces at a constant marginal cost of
$60 and has no fixed costs.
a. Assuming
i.
ii. Profits and producer surplus
iii.
b. Assuming Cournot duopoly, compute
i. Reaction functions for each firm
ii. Profits of each firm
iii. Consumer surplus
iv. Total welfare loss relative to perfect competition (if any)
c. Assuming the firms collude and act as a monopolist, compute
i. Equilibrium price and quantity
ii. Total profits
iii. Consumer surplus
iv. Total welfare loss relative to perfect competition (if any)
d. Rank the output quantities, profits, and total welfare by the three market
structures above
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)