Question 2: Demand in an industry is P = 132 – 2*Q The industry is a...

Question 2: Demand in an industry is P = 132 – 2*Q
The industry is a duopoly, with both firms producing an identical good, though with different cost
functions:
Firm 1’s cost function is C(q) = 10*q
Firm 2’s cost function is C(q) = 8*q
Calculate the Cournot equilibrium quantities, the equilibrium price, and Consumer Surplus.

Expert Solution

See images for answers

Rahul Sunny answered 7 months ago

Question 2 (30 marks) Consider a market with demand characterized by Q = 70 – P....

Question 2 Consider a market with demand characterized by Q = 70 – P. Suppose the market is characterized by perfect competition, and aggregate supply is represented by Q = -20 + 4P. A) Are all firms identical in this market? Why or why not? B) Calculate equilibrium price and quantity. C) Determine producer and consumer surplus associated with this market. Is total surplus maximized? How do you know?

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...

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?

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...

Consider an industry with demand Q = a − p where 3 identical firms that compete...

Consider an industry with demand Q = a − p where 3 identical firms that compete a la Cournot. Each firm’s cost function is given by C = F + c q. Suppose two of the firms merge and that the merged firm’s cost function is given by C = F'+C'q, where F<F'<2F (a) Determine each firm’s market share before and after the merger. (b) Suppose that a = 10 and c = 3. Determine the Herfindahl index after the...

The demand function for buying some plants is p(q) = 2 − q 2000 . The...

The demand function for buying some plants is p(q) = 2 − q 2000 . The cost function for producing q plants is C(q) = 1000 + 0.2q. (a) Find the marginal profit function. (b) Find where the marginal profit function is equal to 0. (c) Show that we get a local maximum at the value found in part (b).

2. If the demand function for X is Q = 100 - P, and the supply...

2. If the demand function for X is Q = 100 - P, and the supply function for X is Q = 40 + 2P, determine the effects on: (a) equilibrium price, (b) quantity traded and (c) government revenue (or cost) if: A tax of $ 6 per unit produced is established. (Is it different from the case of establish a tax of $ 6 per unit consumed?)

Consider an industry facing the market demand curve, p = 25 - 0.25 Q. Given the...

Consider an industry facing the market demand curve, p = 25 - 0.25 Q. Given the cost situation where average cost is equal to marginal cost which is equal to $10: (Points 35) (a) compute competitive price, quantity, profit and consumer surplus; (b) compute monopoly price, quantity, profit, consumer surplus and welfare loss ; (c) show that if a monopolist can further sell its product in the secondary market, then the welfare loss can be diminished.; (d) compute the price elasticity...

Supply and Demand Use the following equations: (1) P = 4 + Q (2) P =...

Supply and Demand Use the following equations: (1) P = 4 + Q (2) P = 12 – 3Q a. Please show steps: a. Which equation represents the supply curve, and which represents the demand curve? How do you know? b. What is the equilibrium price and quantity in this market? c. Graph the supply and demand curves for these equations. d. Suppose the price is $8. What is the new Qs and Qd? What type of disequilibrium situation exists,...

The consumer demand equation for tissues is given by q = (100 − p)2, where p...

The consumer demand equation for tissues is given by q = (100 − p)2, where p is the price per case of tissues and q is the demand in weekly sales. (a) Determine the price elasticity of demand E when the price is set at $34. (Round your answer to three decimal places.) E = Interpret your answer. The demand is going ? up down by % per 1% increase in price at that price level. (b) At what price should tissues...

Question