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Two duopolists are competing in Bertrand fashion (on price), pricing at a marginal cost of $50. The market demand function is P=(100+10E)Q. a. What will
Two duopolists are competing in Bertrand fashion (on price), pricing at a marginal cost of $50. The market demand function is P=(100+10E)Q. a. What will be the equilibrium price and quantity if the duopolists compete on price (i.e., setting P=MC) ? b. What are the values of Consumer Surplus and Producer Surplus in this situation. Graph the equilibrium showing the surplus. c. Suppose the two firms merge to create a monopoly and the marginal cost falls to $30. Find the new equilibrium price and quantity. d. What are the new values of Consumer Surplus and Producer Surplus? Graph the equilibrium showing the surplus. e. Are there gains or losses in efficiency? Explain
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