The market demand curve in an industry is given by P = a -bQ. Any firm has an identical marignal cost MC = c per unit of output a) Suppose there is…

The market demand curve in an industry is given by P = a -bQ. Any firm has an identical marignal cost MC = c per unit of output

a) Suppose there is only one firm in the market. Find the monpoly quantity, price and profit

b) Suppose that there are two firms competing by choosing levels of output. Find the Cournot equilibrium quantity for each firm. Find the market price, and profit for each firm.

c) Compare the total profits in a) and b). In which case consumers woud be better off?

d) Now, asuming that Firm 1 is a Stackelberg leader, find the Stackelberg equilibirum quantities for each firm. Find the market price and profit for each firm.

e) Compare the total profit in d) with a) and b). Are the consumers better off in case d)?

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