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Unformatted text preview: Their costs are given by C 1 = 30Q 1 and C 2 = 30Q 2 , where Q 1 is the output of Firm 1 and Q 2 the output of Firm 2. Price is determined by the following demand curve: P = 150 Q, where Q = Q 1 + Q 2 . a. Find the CournotNash equilibrium. Calculate the profit of each firm at this equilibrium. b. Suppose the two firms form a cartel to maximize joint profits. How many widgets will be produced? Calculate each firms profit. c. If firm 2's MC increases, how would the Cournot Nash equilibrium change? Draw a diagram to illustrate your result (No calculation is necessary)....
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This note was uploaded on 05/11/2011 for the course COMM 295 taught by Professor Ratna during the Winter '09 term at The University of British Columbia.
 Winter '09
 RATNA

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