Let the market demand curve be P = 70 - 2Q, and assume all sellers can produce at a constant marginal cost of MC = 10, with zero fixed costs. a. If the market is controlled by a monopolist, what is the equilibrium price and quantity? How much profit does the monopolist earn? b. Now suppose that Amy and Beau compete as Cournot oligopolists. What is the Cournot equilibrium quantity per seller, total market quantity, market price, and profit per seller? c. Now suppose Amy and Beau decide to collude and form a Monopoly. Amy produces half of the monopoly output. Use the best response functions derived in part b. to determine Beau's best response. Does Beau optimally produce half the monopoly output? Based on this result, does it seem likely that the firms will be able to sustain collusion? Why or why not? Explain
Let the market demand curve be P = 70 - 2Q, and assume all sellers can produce at a constant marginal cost of MC = 10, with zero fixed costs.
a. If the market is controlled by a monopolist, what is the
b. Now suppose that Amy and Beau compete as Cournot oligopolists. What is the Cournot equilibrium quantity per seller, total market quantity, market price, and profit per seller?
c. Now suppose Amy and Beau decide to collude and form a
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