(a) Consider 2 duopolists producing differentiated products. Their total cost functions are as follows: (i) (ii) CA= 10qA Св=8qв (b) where, 9A, QB denote outputs of firms A and B. The demand curves facing the firms can be expressed as: 9A= 88-4PA +2PB 9B= 56 +2PA-4PB Calculate the price charged, output produced, and profit earned by each firm at the Bertrand equilibrium. (o Calculate the price charged, output produced, and profit earned by each firm at the Stackelberg equilibrium where firm A acts as price leader (iii) Calculate the price charged, output produced, and profit earned by each firm if both attempt to be price leaders What is market failure? Discuss three major sources of market failure and in each case, explain why the competitive market does not operate efficiently.f

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Perfect Competition

It is the structure of the market that is said to exist when with many buyers and sellers exchanging similar commodities and its price is fixed by the market forces, demand, and supply, and a single firm cannot cause an impact over the price or market value of the homogenous product. This structure of the market is called perfect competition.