Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $50. Describe what would happen to output andQ = QE + QD
a. Unable to recognize the potential for collusion, the two firms act as short-run perfect competitors. What are the equilibrium values of QE, QD, and P? What are each firm's profits?
b. Top management in both firms is replaced. Each new manager independently recognizes the oli- gopolistic nature of the light bulb industry and plays Cournot. What are the equilibrium values of QE, QD, and P? What are each firm's profits?
c. Suppose the Everglow manager guesses correctly that Dimlit is playing Cournot, so Everglow plays Stackelberg. What are the equilibrium values of QE, Q , and P? What are each firm's profits?