Consider a Market with (Inverse)demand P = 100 - 2Q

question 31

Essay

Consider a market with (inverse)demand p = 100 - 2Q.There are two firms in the market with constant marginal and average costs of $10.
a.Determine the Cournot equilibrium quantities and price
b.What would be the collusive (joint-profit maximizing)price and quantity?
c.Derive the deadweight loss from (i)Cournot Dupoly, (ii)Collusion,and (iii)Perfect competition in this market with the two firms.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, with holders usually having voting rights and a claim on profits in the form of dividends.

Stock Dividend

A dividend paid to shareholders in the form of additional shares of stock rather than cash.

Stock Split

A corporate action that increases the number of shares outstanding by dividing each share, which typically reduces the share price.

Par Value

The face value of a bond or the stated value of a share of stock at the time it is issued, typically used in accounting and finance.