Consider a market with just one firm. The demand in the market is p=18-Q and the firm has a linear cost function C(Q)=2Q. How much will this firm produce? What will be the profit and consumer surplus? Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style. What will be the equilibrium price and quantity in the market? What is the total market profit and consumer surplus?
