Question: Suppose that the market demand for mountain spring water is given as follows: P = 1200 - Q, where P = market price and Q = market quantity demanded

Mountain spring water can be produced with fixed costs of $120,000 and zero variable costs.

a) (5 marks)

If this industry was characterized as a single price monopoly, what would be the profit maximizing output, price and level of profits for the firm?

b) (10 marks)

What would be the profit maximizing output, price and level of profits in equilibrium, for each firm in a Cournot duopoly?

c) (5 marks)

What would be the profit maximizing output, price and level of profits in equilibrium, for each firm in a Bertrand duopoly?