Consider an industry with two firms, each of which has a constant marginal cost of 20. The inverse demand facing this industry is P(Y) = 220 −Y, where Y = y1 + y2 is the total output. 1.   What is the competitive level of output? (Recall: price equals marginal cost at the competitive equilibrium.) 2.   What is the output of each firm in the Cournot equilibrium? 3.   What is the output of each firm in the Stackelberg equilibrium when firm 1 is the follower and firm 2 is the leader?

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