118. Consider a market with just one firm. The demand in the market is = 18- and the firm has a linear cost

function () = 2.

118.1. How much output will this firm produce. What will be the profit and consumers surplus?

118.2. Suppose a second firm with the same cost function enters the market and the two firms compete in

a Cournot style (simultaneous output choice). What will be the equilibrium price and quantity in the

market? What is the total market profit and CS?

119. Suppose Ralph sells bento lunches which have the following demand:

= 100- - 0.5

where is the price of Ralph's bentos and is the number of bentos Ralph sells, is the number of

bentos Ralph's rival Dave sells. Dave's demand is given by:

= 100- - 0.5

where is the price Dave can sell his bentos for. Suppose each seller has a cost per unit (average and

marginal) of $1.

119.1. How does this game differ from the Cournot model with identical products? Why do the demand

curves indicate that the goods are differentiated - not perfect substitutes for one another?

119.2. Compute the best response functions for each seller and the Nash Equilibrium outputs and prices.