Fall 2020 Economics 329 Problem Set 3: Monopoly, Oligopoly and Perfect Competition 1. Suppose total demand is given by the equation P = 200 - 4Q. MC = AC = $10. a. Find the competitive price and output b. Find the monopoly price and output level c. Suppose there are two firms. Find the Cournot output total output level and the amount produced by each firm. Find the Cournot equilibrium price. d, Find the total surplus under competition, monopoly and in a two firm Cournot industry (parts a, b, and c above). e. Find the Bertrand equilibrium output and price. 2. In 1971, the federal government prohibited the advertising of cigarettes on television and radio. Can you explain why this ban on advertising might have raised the profits of cigarette manufacturers (Profits did rise in 1971-1972)? Hint: Use the advertising game discussed in class (and in the text).