Q. Assume that two firms compete in quantities (Cournot) in a market in which demand is described by P = 260 - 2Q. Every firm acquires no fixed prices except has a constant marginal cost of 20.
a. What is the one-period Nash equilibrium market price? What is the output and profit of each firm in this equilibrium?
b. What is the output of each firm if they collude to produce the monopoly output? What profit does each firm earn with such collusion?