Suppose that there are 2 identical firms in an industry, each producing the same good at the same constant marginal cost of $10. The Consumer Demand is given by: P(Q) = 100 - Q/50.
1. Determine the Bertrand equilibrium?
2. Determine the Consumer Surplus and the Deadweight Loss in this Bertrand model.
3. Calculate the Cournot equilibrium?
4. Illustrate this Cournot equilibrium on a graph, plotting the best response functions for each firm and labeling the graph carefully.