Question:

Two firms who make identical products engage in Cournot competition. The inverse market demand curve is: p(q) = 33 - 2q Firm 1's cost function is: ci (q1) = 91 Firm 2's cost function is: c2 (q2) = q2 + 0.597 1. Find the Nash equilibrium quantities for each firm. 2. Calculate profit for each firm and calculate consumer surplus. 3. Describe what you think the socially efficient outcome should be (i.e. how much should each firm produce to maximize total surplus?) 4. Calculate deadweight loss relative to the efficient outcome (the difference in total surplus between the two outcomes)