Reference no: EM133125032

Suppose that the inverse demand for tablets is =1100-2. The total cost of producing tablets is ( ) = 200 , so that the = $200.

a. Suppose that the market for tablets is perfectly competitive. What is the price and quantity sold in equilibrium? What is the producer surplus? What is the consumer surplus? Is this outcome Pareto efficient (socially optimal)?

b. Suppose instead that MacroTech is the only producer of tablets and that it cannot price discriminate. What is the price and quantity sold in equilibrium? What is the consumer surplus? What is the producer surplus?

c. Now assume that MicroTech enters the market for tablets. MicroTech is the only competitor of MacroTech and the two companies have the same cost structure.

c1. Find each firm's reaction function (the optimal quantity produced given the production of the other firm), and compute the Cournot equilibrium quantities and price.

c.2 What is the consumer surplus in this case? Which scenario (perfect competition, monopoly, or duopoly) is most preferred by consumers? Explain.

c.3 What is the joint producer surplus? How does that compare with the producer surplus of MacroTech as a pure monopolist, and as a perfectly competitive firm?