Monopoly, duopoly and barriers to entry Assignment

Monopoly, duopoly and barriers to entry - Assignment ExampleThus, Q = 3 is the profit maximizing output.This is not a Pareto efficient equilibrium. Pareto efficiency requires the price to equal marginal cost. Therefore, the Pareto efficient equilibrium would have the price equalling $12 and then from the demand curve we find that the Pareto efficient equilibrium quantity would be the solution to 12 = 24 2Q which implies that the Pareto efficient quantity would be Q = 6.1) Playing Dont befriend is the dominant dodge for both firms. Note when the other firm plays machinate, playing Collude yields a payoff of $9 whereas Dont cooperate yields a payoff of $10. Again, when the other firm plays Dont cooperate, playing Collude yields a payoff of $7 whereas Dont cooperate yields a payoff of $8. Therefore, playing Dont cooperate yields a higher payoff irrespective of the rival firms strategy. Hence, Dont cooperate is a dominant strategy for both firms.2) The Nash equilibrium strategy profi le is Dont cooperate, Dont cooperate.This is best seen by noticing that since Dont cooperate is a dominant strategy, neither impostor has a unilateral incentive to deviate from this profile. Hence, it is the unique Nash equilibrium in this game.3) The Nash equilibrium strategy profile leads to essence profits of $16 ($8+$8). The highest aggregate profits are earned in this game from the Collude, Collude profile, where both players earn $9 so that the aggregate profits are $18. Therefore, the Nash equilibrium strategy profile does not maximize aggregate profits.4) The monopolist prices the good at $18 and sells 3 units in equilibrium. Its per unit cost is 12. Thus the monopolists total revenue is TR = 3 x 18 = $54 and its total cost is TC = 12 x 3 = 36. Therefore the monopolists profit is $54 - $36 = $18.If the firms successfully collude, their total aggregate profits are equal to the monopolists profits. But since they