Suppose market demand is P = 130 - Q.
a) If two firms compete in this market with marginal cost c = 10, find the Cournot equilibrium output and profit per firm.
b) Find the monopoly output and profit if there is only one firm with marginal cost c = 10.
c) Using the information from parts (a) and (b), construct a 2 × 2 payoff matrix where the strategies available to each of two players are to produce the Cournot equilibrium quantity or half the monopoly quantity.
d) What is the Nash equilibrium (or equilibria) of the game you constructed in part (c)?