Do duopolists produce a pareto efficient level of output

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Consider two firms that act as Cournot competitors and face the inverse demand function p(.), where p'(Y1 + Y2) < 0. The total cost function for firm i is given by Ci(.), where Ci'(Yi) > 0 i = 1,2.

a) Do such duopolists produce a Pareto efficient level of output?

b)Would a lump sum subsidy placed on one or both duopolists work to entice the firms to produce a Pareto efficient level of output" Show your work and clearly explain why or why not.

Reference no: EM13237966

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