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The price in a market is dominated by two firms is affected by the quantities supplied by both firms, Q1 and Q2: P = 80 - (Q1 + Q2). The marginal cost for the two firms is identical and constant and equal to 20.
a. Derive the equations for total revenue for the two firms.
b. Compute the profit-maximizing levels of output and prices for the firms.
c. Compute the profit-maximizing level of output and price for the industry if the duopolists merged and formed a monopoly.
d. Compare and contrast the results from b. and c.
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