The inverse market demand for fax paper is given by P=400-2Q. There are two firms who produce fax paper. Each firm has a unit cost of production equal to 40, and they compete in the market in quantities. That is, they can
choose any quantity to produce, and they make their quantity choices simultaneously.
a. show how to derive the Cournot-Nash equilibrium to this game. What are firms' profit in equilibrium?
b. What is the monopoly output i.e. the one that maximizes total industry profit? Why isn't producing one half the monopoly output a Nash equilibrium outcome?