Suppose that the demand curve for COVID-19 is given by Q = 100 – 0.5P Where Q is total industry output. The market is divided by two firms, each with constant marginal costs equal to $8.
[NOTE: Show all the details and steps of your calculation to answer following questions]
a) Calculate the equilibrium price and quantity assuming the two firms compete in quantities.
b) How would your answer to (a) change if one of
the firm’s costs rose to $10?
c) Repeat parts (a) and (b) assuming the competition is in prices rather than quantities.