Suppose the short-term equilibrium corresponds to the Cournot equilibrium with two firms, 1 and 2, facing the inverse demand =10-1-2 and incurring a constant marginal cost 1=2= 2.

A) Determine the monopoly profit and assume it is split equally among the two firms.

Assume firm 1 deviates from the collusive outcome.

B) Determine the output and profit for both firms during the deviation period.

C) Determine the punishment output and profit for both firms, which correspond to the output and profit for both firms at the Cournot equilibrium.

D) Determine the discount rate that makes collusion sustainable assuming both firms adopt a trigger strategy.