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Rocky's and Bullwinkle's are the only fish bait shops in Moosehead, ME. The daily inverse market demand curve for fish bait in Moosehead is =
Rocky's and Bullwinkle's are the only fish bait shops in Moosehead, ME. The daily inverse market demand curve for fish bait in Moosehead is = 7 0.1(1 + 2). The marginal cost of supplying a unit of fish bait is $1 for both shops. a. Find the equilibrium price of a unit of fish bait and the number of units sold per day by each shop if they compete as Cournot duopolists. Also, compute daily consumer surplus and daily profit on fish bait for each shop. b. Suppose that the two bait shops act as a profit-maximizing fish bait cartel. Find the equilibrium price of a unit of fish bait and the number of units sold per day by the cartel. Compute daily consumer surplus. Also, compute each shop's daily output and profit if each shop supplies half of the total quantity of fish bait supplied by the cartel. c. Write down the payoff matrix facing the two bait shops if each decides between just two possible quantity choices: (i) supply exactly half of the profit-maximizing total quantity of the cartel or (ii) supply the profit-maximizing Cournot quantity. d. Find the Nash equilibrium of one round of play of
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