Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $40. Describe what would happen to output and

price in each of the following situations if the firms are

at (i) Cournot equilibrium, (ii) collusive equilibrium,

and (iii) Bertrand equilibrium.

a. Because Firm A must increase wages, its MC

increases to $70.

b. The marginal cost of both firms increases.

c. The demand curve shifts to the right.

Draw graphs to support