Two firms produce a homogeneous product. Let p denote the product's price. The output level of firm 1 is denoted by q1, and the output level of firm 2 by q2. The aggregate industry output is denoted by Q, Q = q1 + q2. The aggregate industry demand curve for this product is given by p = 4 Q.

Assume that the unit cost of firm 1 and 2 is c1 = c2 = 2.

a. Suppose the firms move simultaneously and compete a la Cournot. What is the market price? Find the firm profits, consumer surplus, total surplus, and deadweight loss.

b. Suppose the firms move simultaneously and compete a la Bertrand. What is the market price? Find the firm profits, consumer surplus, total surplus, and deadweight loss.

c. Explain why your answers from part a and b differ.