Suppose we have the "classic" Cournot duopoly model, with a linear demand curve P = a - bQ And two firms which are identical, each with total costs TC(q) = c + dq. (a) What is the market price in the Cournot equilibrium and what profit is earned by an individual firm? (b) Compare individual quantity, market quantity, market price, individual profits and consumer surplus ( show it in a graph) to the outcomes of this market were a monopoly. Comment on your results. Show all the steps of the calculation

Suppose we have the "classic" Cournot duopoly model, with a linear demand curve P = a - bQ And two firms which are identical, each with total costs TC(q) = c + dq. (a) What is the market price in the Cournot equilibrium and what profit is earned by an individual firm? (b) Compare individual quantity, market quantity, market price, individual profits and consumer surplus ( show it in a graph) to the outcomes of this market were a monopoly. Comment on your results. Show all the steps of the calculation

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter10: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 9SQ

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Suppose we have the "classic" Cournot duopoly model, with a linear demand curve P = a - bQ And two firms which are identical, each with total costs TC(q) = c + dq.
(a) What is the market price in the Cournot equilibrium and what profit is earned by an individual firm?
(b) Compare individual quantity, market quantity, market price, individual profits and consumer surplus ( show it in a graph) to the outcomes of this market were a monopoly.

Comment on your results. Show all the steps of the calculation

Consumer’s gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price and up to the equilibrium quantity. Consumer surplus is represented by area A.

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