The market for cucumbers faces a market demand function given by P = 2000 - 100Q(farm...

The market for cucumbers faces a market demand function given by P = 2000 - 100Q(farm ) - 100Q(town). Only two firms exist in this market: Farm's farm and Town farms.

Both firms have a constant marginal cost MC = 1000.

   a) Get the reaction function for both farms.
   b) Illustrate both reactions functions.
   c) Identify the equilibrium
   d) What if they began the process of competition with farms farm choosing to produce 1 unit. Do two steps of reaction.
   e) Will total output be higher than monopolist output? What about price? How does competition impact firms behaviours? Is it welfare maximizing for society?

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Expert Solution

Rahul Sunny answered 1 month ago

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