Q. In this problem we consider the differences between the competitive, monopoly, and Cournot equilibria under the same cost conditions. Consider demand as:
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 conclusion. On your graph label this point. Also compute deadweight loss, consumer surplus as well as industry profits.
c. Calculate the price and quantity associated with a monopoly outcome. On your graph label this point. Also calculate consumer surplus, deadweight loss, and industry profits.
d. Consider the possibility that there are only two firms in the industry and that they compete based on simultaneously determining quantity. Analyze the equilibrium cost and quantity in this case and label it on your graph. Moreover calculate, deadweight loss, consumer surplus as well as industry profits.