Equilibrium quantities selected by each firm

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A monopolist Clear Water Ltd clean water in 10 litre containers and sells it to a small town. It can produce at a total cost of 10Q per day. It faces a daily market demand curve given by 2Q = 90 - P. A second firm namely Pure Water Ltd enters the market. Let Q1 be the output of Clear Water and Q2 is the output of Pure Water. Market demand is thus now given by Q1+Q2 = 90 - P. Assuming Pure Water has the same costs as Clear Water. If each firm is to maximise its profits, taking its rival's output as given (i.e., behave as Cournot oligopolists):

(i) equilibrium quantities selected by each firm?

(ii) the total output and the market price and profit for each firm?

(iii) the market (public) better off as under the monopolist in question?

Reference no: EM132056669

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