There are two firms in an industry. The industry demand is given by P = 84...

There are two firms in an industry. The industry demand is given by P = 84 - Q, where Q is the total output of the two firms. The follower has a marginal cost of $0, and the leader has a marginal cost of $21. What are the equilibrium prices and outputs of the two firms under

a) Perfect competition;

b) Bertrand duopoly;

c) Cournot duopoly;

d) Stackelberg duopoly?

Expert Solution

Rahul Sunny answered 10 months ago

Two firms operate in an industry with inverse demand given by p = 12 – q....

Two firms operate in an industry with inverse demand given by p = 12 – q. each firm operates with constant marginal cost equal to 0 and fixed cost equal to 4. Firms compete by setting the quantity to sell in the market . A) Determine the best reply function of each firm. b) Determine what are in equilibrium the quantities offered by each firm, the market price and the profits obtained by each firm. Assume now N firms operate...

Industry demand is given by: QD = 1000 - P All firms in the industry have...

Industry demand is given by: QD = 1000 - P All firms in the industry have identical and constant marginal and average costs of $50 per unit. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn? Now, suppose that there are five firms in the industry and they collude to set the price. What price will they set? What will be the output of each firm?...

An industry has two firms. The inverse demand function for this industry is p = 74...

An industry has two firms. The inverse demand function for this industry is p = 74 - 4q. Both firms produce at a constant unit cost of $14 per unit. What is the Cournot equilibrium price for this industry?

Consider an industry which has a market demand curve given by P=260−2Q. There are two firms...

Consider an industry which has a market demand curve given by P=260−2Q. There are two firms who are Cournot competitors. Firm 1 has marginal costc1=80 and firm2 has marginal costc2=20. (a) [10 points] Find the Nash equilibrium quantities for these two firms. (b) [20 points] Use the quantities you found in part (a) to find the profits for each firm and the market-clearing price. (c) [20 points] Suppose these firms decide to form a cartel and collude. The firms will...

There are two firms in an industry with demand P=130-Q. Both firms have a constant marginal...

There are two firms in an industry with demand P=130-Q. Both firms have a constant marginal cost of production equal to $40. a) If there are no fixed costs what will be the Cournot equilibrium levels of output for each firm? (b) In part a), what is the market price and the profit for each individual firm? (c) If the fixed cost is instead $1300 for each firm and there is entry and exit in the market, how many firms...

1. Suppose the demand function of an industry is P=100-0.5X and there are two firms A...

1. Suppose the demand function of an industry is P=100-0.5X and there are two firms A and B in it. Futher assume that the firm A has a constant cost function of CA = 5xA and firm B has an increasing cost function CB =0.5xB. (X= xA +xB ). a. What would the reaction function of each firm? b. What would be the profit of each firm? c. What would the out put of each firm? d. What would be...

In an industry where demand is Q = 120 – P and two identical firms have...

In an industry where demand is Q = 120 – P and two identical firms have MC = AC = 30 find the Cournot and the Stackelberg equilibriums and compare the corresponding market outcomes. Do consumers have a preference for one market structure over the other?

The market demand curve is given by p = 100 - Q Two firms, A and...

The market demand curve is given by p = 100 - Q Two firms, A and B, are competing in the Cournot fashion. Both firms have the constant marginal cost of 70. Suppose firm A receives a new innovation which reduces its marginal cost to c. Find the cutoff value of c which makes this innovation "drastic".

There are N symmetric firms in the industry, facing market demand Q (p) = 250-p Firms...

There are N symmetric firms in the industry, facing market demand Q (p) = 250-p Firms have a constant marginal cost of production of c = 10, and they compete in prices. a) What are the Bertrand equilibrium price, output levels, and profits? b) Suppose that the firms want to sustain the monopoly price using grim trigger strategies. Let each firm produce a share of 1/N of the total demand under collusion. Calculate the critical discount factor as a function...

6. Assume an industry with two firms facing an inverse market demand of P = 100...

6. Assume an industry with two firms facing an inverse market demand of P = 100 - Q. The product is homogeneous, and each firm has a cost function of 600 + 10q + 0.25q2. Assume firms agree to equally share the market. a. Derive each firm’s demand curve. b. Find each firm’s preferred price when it faces the demand curve in part a. Now assume that firm 1’s cost function is instead 25q + 0.5q2 while firm 2’s is...

Question