Consider the market demand curve for appliances: P = 3,200-(1/4)Q. There are no fixed production costs, and the marginal cost of each appliance is MC = $400.
(a) Determine the output that will be produced in a ‘perfectly competitive' market structure where no profits accrue in equilibrium.
(b) If this market is supplied by a monopolist what is the profit maximizing output?
(c) What will be the total output produced in the Cournot duopoly game? [Hint: you can either derive the reaction functions and solve them, or use the formula from Section 10.6 of the chapter.]