1. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 960-6Q. Each firm produces at a constant marginal cost of $60 and has no fixed costs. a.Assuming the firms collude and act as a monopolist, compute i. Equilibrium price and quantity ii. Total profits iii. Consumer surplus iv. Total welfare loss relative to perfect competition (if any) b. Assuming perfect competition, compute i. Equilibrium price and quantity ii. Profits and producer surplus iii. Consumer surplus and total surplus
1. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 960-6Q. Each firm produces at a constant marginal cost of $60 and has no fixed costs. a.Assuming the firms collude and act as a monopolist, compute i. Equilibrium price and quantity ii. Total profits iii. Consumer surplus iv. Total welfare loss relative to perfect competition (if any) b. Assuming perfect competition, compute i. Equilibrium price and quantity ii. Profits and producer surplus iii. Consumer surplus and total surplus
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.3P
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Question
1. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 960-6Q. Each firm produces at a constant marginal cost of $60 and has no fixed costs.
a.Assuming the firms collude and act as a monopolist, compute
i.
ii. Total profits
iii. Consumer surplus
iv. Total welfare loss relative to
b. Assuming perfect competition, compute
i. Equilibrium price and quantity
ii. Profits and producer surplus
iii. Consumer surplus and total surplus
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