Question
Two organic emu ranchers, Bill and Ted, serve a small metropolitan market. Bill and Ted are Cournot competitors, making a conscious decision each year regarding
Two organic emu ranchers, Bill and Ted, serve a small metropolitan market. Bill and Ted are Cournot competitors, making a conscious decision each year regarding how many emus to breed. The price they can charge depends onhow many emus they collectively raise, and demand in this market is given by Q = 150 - P. Bill raises emus at aconstant marginal and average total cost of $10; Ted raises emus at a constant marginal and average total cost of $20.
a)a)Find the Cournot equilibrium price, quantity, profits, and consumer surplus.
b)b)Suppose that Bill and Ted merge, and become a monopoly provider of emus. Further, suppose that Ted adopts Bill's production techniques. Find the monopoly price, quantity, profits, and consumer surplus.
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