2. Suppose the market demand curve is P = 40 − 3Q and all firms in the industry face M C = 4 and have no fixed costs. For each of the following situations, calculate the five items:
Market Price , Quantity per firm ,Profits per firm ,Consumer Surplus ,Deadweight Loss
(a) Uniform pricing monopolist
P = Q = π = CS = DWL =
(b) Cournot Duopoly
P= Q1 = Q2 = π 1 = π2 = CS = DWL =
(c) Stackelberg Duopoly
P= Q1 = Q2 = π 1 = π2 = CS = DWL =
(d) Bertrand Duopoly (can set price to any increment)
P= Q1 = Q2 = π 1 = π2 = CS = DWL =
(e) Suppose the market demand is P = 10 –Q and there are 3 identical firms with MC = 0 and a fourth firm with MC = 1. Solve for the Cournot equilibrium quantities for each of the four firms.
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2. Suppose the market demand curve is P = 40 − 3Q and all firms in...
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