(Competition in Both Retail and Wholesale Markets)

Suppose there are two manufacturer in the wholesale market engaging in the Cournotcompetition (production competition as we learned in Chap 4), with both marginal costs at 60, MC_M1= MC_M2=60, and no fixed cost.There are two retailers engaging in the Bertrand competition in the retail market (pricing competition as we learned in Chap 4&5), with the retail demand equation: p=180-q.

The manufacturers first simultaneously choose their production levels, q₁ and q_2,and then after observing the consequent wholesale price w, the retailers simultaneously choose their retail prices, p1 and p2. And they all work separately from each other.

Find the consumer surplus at the equilibrium.

a) 3200

b) 4800

c) 6400

d) 1600

e) none of these