Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on). What would the perfectly competitive equilibrium price and quantity be? What would be the consumer surplus and producer surplus? Draw each firm’s residual inverse demand curve.
Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on). What would the perfectly competitive equilibrium price and quantity be? What would be the consumer surplus and producer surplus? Draw each firm’s residual inverse demand curve.
Chapter9: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 11SQP
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- Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the
demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on).- What would the
perfectly competitiveequilibrium price and quantity be? What would be theconsumer surplus and producer surplus? - Draw each firm’s residual inverse demand curve.
- Calculate the Cournot-Nash equilibrium price and quantity. What is the total consumer surplus, total producer surplus across the two firms, and
deadweight loss ?
- What would the
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