II.
Consider a market for refrigerators with two firms. Firm 1 has a linear cost function
$C(q_1) = 19q_1$, and firm 2's cost function is $C(q_2) = \frac{1}{2}q_2^2$. The market inverse demand
function is $P(Q) = 100 - 0.5Q$, where $Q$ is the total quantity produced.
1. If firms compete à la Cournot, what is the Cournot-Nash equilibrium optimal price and
quantity of refrigerators produced?
2. Suppose the two firms decided to form a Cartel, determine the optimal price and quantity
of refrigerators produced.
3. Compare total profits in Cournot and in Cartel, with intuitive explanation.