21. (15 points) Two firms, Firm 1 and Firm 2, are currently engaged in Cournot competi- tion. Both firms sell widgets, a

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21 15 Points Two Firms Firm 1 And Firm 2 Are Currently Engaged In Cournot Competi Tion Both Firms Sell Widgets A 1 (25.15 KiB) Viewed 18 times

21 15 Points Two Firms Firm 1 And Firm 2 Are Currently Engaged In Cournot Competi Tion Both Firms Sell Widgets A 2 (22.28 KiB) Viewed 18 times

21 15 Points Two Firms Firm 1 And Firm 2 Are Currently Engaged In Cournot Competi Tion Both Firms Sell Widgets A 3 (19.69 KiB) Viewed 18 times

21. (15 points) Two firms, Firm 1 and Firm 2, are currently engaged in Cournot competi- tion. Both firms sell widgets, and the demand for widgets is given by P = 250-91-92. Both firms have the same marginal cost of MC = $70. (a) What is each firm's best reply function? (b) What are the Cournot quantities and price?
(c) What is each firm's profit? (d) Now suppose that the firms collude, splitting total profits evenly. With collusion, how many widgets are produced and at what price? Hint: MR = 250-2Q. (e) What are each firm's collusive profits, assuming an even split?
(f) What are the standard antitrust damages? (g) The government has enough resources to detect collusion with probability p = 1. If firms are fined the damages you found in the previous part, is the detection probability high enough to deter collusion?