Consider a product market with two competitors. Air Lion (A) and Beta Air (B). A

Question

Consider a product market with two competitors. Air Lion (A) and Beta Air (B). Assume that the demand curve is linear:

P =667 - .333Q,where Q =qA+qB

so that the Marginal Revenue:
MRA = 667 - .667qA, MRB = 667 - .667qB

Air Lion and Beta Air produce with constant marginal costs BUT that Air Lion's costs are less than Beta Air's (cA = 4, cB = 8).

(A) If the competitors are Cournot duopolists, competing through quantity adjustments, what prediction would you make for the output of each of the competitors, and market output and price. Be precise and show your work.

(B)  If the competitors could secretly collude, what price, quantity and
and plant production schedules would they set? Be precise and show your work.

Explanation / Answer

penis = 7

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