For each market, the market demand is the following. QD=100-P. The price that

your goods will sell at is the highest price at which all the goods produced would

sell (P=100-Q). For instance, if there are two firms and the first firm produces 5

units and the second firm produces 6 units, then the price that goods will be sold

at is $89 each. If 20 total units are sold, the price would be $80 each.

The marginal cost of producing a unit of a good for your firm is $5 for each unit

(no fixed cost). Thus in the first example above, the revenue for the first firm

would be 5 X $89 = $445 and the cost would be 5 X $5 = $25. The profit would

then be $420.

The way the games works is that all of the firms simultaneously announce their

output. The price is determined by the sum of all of the output produced by the

firms and the demand for the product. Each firm's profit is then calculated as in

the above example.

Before beginning, solve the following problems as a group.

1) Suppose that the other firms together produce a total of 25 units of output. If

you produce 20 units what will be your profit?

2) Suppose that the other firms together produce a total of 80 units of output. If

you produce 20 units what will be your profit?

3) If the other firms produce 50 units of output together, what is the level of

output you should produce to maximize your profit? (The residual demand is the

original demand less the output produced by the other firms, Q=100-50-P.)