Question

1) Suppose the monopoly has broken up into two separate companies. The demand function is P=105-3Q. The firms do not collude and the firms have identical marginal cost functions (MC1=MC2=40.). Also assume they are Cournot duopolists. Determine the quantity and price of each firm.
Quantity for firm 1: ________
Quantity for firm 2: ________
Price in each market: $_________
2) Now assume these firms are acting like Bertrand duopolists. What quantity will each firm produce and what will be the market price?
Quantity for firm 1 and 2: _________
Market price: $___________
3) Assume that firm 1 is acting as a Stackelberg leader and firm 2 is acting as the Stackelberg follower. The demand function is P=105-3Q. The firms do not collude and the firms have identical marginal cost functions (MC1=MC2=40). Determine:
(a) the demand function faced by the leader: ________
(b) the quantity produced by the leader: ________
(c) the quantity produced by the follower: ________and
(d) market price: ________

Answer 1