19.1 Assume for simplicity that a monopolist has no costs of production and faces a demand curve given by Q= 150 -P.

a. Calculate the profit-maximizing price-quantity combination for this monopolist. Also calculate the monopolist's profits.

b. Suppose a second firm enters the market. Let qx be the output of the first firm and q2 the output of the second. Market demand is now given by qx + q2 = 150 - P.

Assuming this second firm also has no costs of production, use the Cournot model of duopoly to determine the profit-maximizing level of production for each firm as well as the market price. Also calculate each firm's profits.

c. How do the results from parts

(a) and

(b) compare to the price and quantity that would prevail in a perfectly competitive market? Graph the demand and marginal revenue curves and indicate the three different price-quantity combinations on the demand curve.