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2. Suppose the market demand curve is P = 40 − 3Q and all firms in...

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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