IMPERFECT COMPETITION A monopolist can produce at constant marginal and average cost of MC=AC=5 and faces a market demand curve of Q=53−P a) Find the profit maximizing quantity and price of the monopolist as well as profits [4 marks] b) Suppose firm 2 with the same cost to firm 1 enter the market which it shares with firm 1 such that the market demand becomes q 1
​
+q 2
​
=53−P. Calculate the profit of firm 1 and 2 as a function of q 1
​
and q 2
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[2 marks] c) After the Cournot, suppose each firm chooses level of output so as to maximize profits on the assumption that the other's output is fixed. Calculate its firm's 'reaction function' which expresses desired output of one firm as a function of the other's output [4 marks] d) Find each firm's profit maximizing output (q 1
​
and q 2
​
), market price, each firm's profits and two firm's (duopolies) total profit [5 marks] c) Suppose unlike a simultancous model assumption of part b) to d), firm 1 has a first mover advantage (market leader) and firm 2 is a follower, what will be cach firm's profit maximizing output ( q 1
​
and q 2
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), market price, each firm's profits and two firm's (duopolies) total profit in this Stackelbery sequential model [6 marks]
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