In this problem we consider the differences between the competitive, monopoly, and Cournot equilibria under the same cost conditions. Demand is:
Q = 10,000 - 1000 P
and marginal cost (and average cost) is constant at MC = $6.
a. Graph the demand, marginal revenue, and marginal cost curves.
b. Calculate the price and quantity associated with the perfectly competitive outcome. Label this point on your graph. Also compute consumer surplus, deadweight loss, and industry profits.
c. Calculate the price and quantity associated with a monopoly outcome. Label this point on your graph. Also compute consumer surplus, deadweight loss, and industry profits.
d. Consider the possibility that there are only two firms in the industry (call them A and B) and that they compete based on simultaneously determining quantity. Calculate the equilibrium price and quantity in this case and label it on your graph. Also compute consumer surplus, deadweight loss, and industry profits.