Assume that duopolists in the market share a market demand curve given by the following linear demand function:

P=120-Q1-Q2, where Q1and Q2are the quantities sold by the respective firms and P is the market price.

Marginal cost functions for the two companies are:

MC1=7+1.5Q1and MC2=9+Q2.

a. Assuming that the firmsact independently as in the Cournotmodel (quantity competition), compute the equilibrium output level for each firm and market price. Q1=, Q2=, P=$.

b. Assume that the firmscollude to maximize the joint profits,compute the equilibrium output level for each firm and market price. Q1=, Q2=, P=$.