A homogeneous-good duopoly faces an inverse market function of p = 120 – Q. Firm 1 has a constant marginal cost of MC1 = 20. Firm 2’s constant marginal cost MC2 = 30. Calculate the output of each firm, market output, and price for (a) a Nash-Cournot equilibrium and (b) a collusive equilibrium at the monopoly price. First, consider the Nash-Cournot equilibrium. What is the Profit for Firm 1 . When considering the collusive monopoly equilibrium, only Firm 1 will produce because its marginal cost is lower ($20 versus $30 per unit). What will be the monopoly’s profit function?
