Question

In: Economics

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?

Solutions

Expert Solution

Rahul Sunny answered 9 months ago
Next > < Previous

Related Solutions

A monopolist faces a market demand curve of q=100-p. The monopolist’s cost function is given by...
A monopolist faces a market demand curve of q=100-p. The monopolist’s cost function is given by (q) = 3000 + 20q. a) If the monopolist can perfectly price discriminate, how many units will be sold? b) If the monopolist can perfectly price discriminate, how much consumer surplus will there be? c) If the monopolist cannot price discriminate, how much consumer surplus will there be? (For this question, think long run.)
A monopolist faces a market demand: P = 200 – Q. The monopolist has cost function...
A monopolist faces a market demand: P = 200 – Q. The monopolist has cost function as C = 1000 + Q2, and marginal cost MC = 2Q. ( 1) Solve for Marginal Revenue (MR) function. (2) Find the profit-maximizing quantity? Profit? (3) Suppose the monopolist decides to practice 3rd degree price discrimination. Without solving for the 3rd degree price discrimination, can you compare the new profit earned by the monopolist with the old profit?
A monopolist with the cost function C(q) = q faces the market demand curve p =...
A monopolist with the cost function C(q) = q faces the market demand curve p = 101 -2q. What is the maximum amount the monopolist is willing to pay for advertising that shifts its demand curve to p = 101-q?
a) A duopolist faces a market demand curve given by P = 56-2Q . Each firm...
a) A duopolist faces a market demand curve given by P = 56-2Q . Each firm can produce output at a constant MC of $20 per unit. find the equilibrium quantity for the market. b) A duopolist faces a market demand curve given by P = 56-2Q . Each firm can produce output at a constant MC of $20 per unit. Firm one is the leading firm and makes the first decision. find the equilibrium quantity for the market.
A monopolist faces a market demand curve given by QD= 100 – P/3 and has a...
A monopolist faces a market demand curve given by QD= 100 – P/3 and has a cost function described by C = 30Q +1.5Q2. Solve for the monopolist’s profit maximizing output and price. With reference to question 4 above, suppose the demand facing the monopolist increases to QD= 120 – P/2. Solve for the new profit maximizing values of price and quantity. Describe how the two answers differ and explain those differences in terms of the demand change. The market...
Q: A homogenous-good duopoly faces an inverse market demand function of P = 57 – Q....
Q: A homogenous-good duopoly faces an inverse market demand function of P = 57 – Q. Firm 1 has a constant marginal cost of MC1 = 10. Firm 2’s constant marginal cost is MC2 = 6. Calculate the output of each firm, market output, and price for a Nash-Cournot equilibrium. Draw the best response functions for each firm. Show the solution steps please
Acme is a monopolist who faces inverse market demand function P (Q, y) = 100 -...
Acme is a monopolist who faces inverse market demand function P (Q, y) = 100 - 2Q + y, where y is the quality level of Acme’s product. Acme has cost function function C(Q) = 20Q. Suppose quality is costly. Specifically, assume that Acme must pay innovation cost I(y)= (1/4)(y^2). Thus, Acme’s total profits are x(Q,y)=P(Q,y)Q - C(Q) - I(y). Assuming Acme is allowed to act like a monopolist, we will work out Acme’s optimal quality choice, y*. 1. Suppose,...
Suppose your firm is told that the demand function it faces from its market is given...
Suppose your firm is told that the demand function it faces from its market is given by Q = 8 − 0.5 Its cost per unit is constant and equal to $1.5. Assume that it produces integer number of units (i.e. Q=0,1,2, 3...and so on). (a) Describe in how you would use this demand function above to obtain your consumers’ marginal utility (or maximum willingness-to-pay) for each unit of your firm’s product. (b) Construct a table showing the Price, Demand,...
Suppose your firm is told that the demand function it faces from its market is given...
Suppose your firm is told that the demand function it faces from its market is given by Q = 8 − 0.5p Its cost per unit is constant and equal to $1.5. Assume that it produces integer number of units (i.e. Q = 0,1,2, 3…and so on). 1. Describe in how you would use this demand function above to obtain your consumers’ marginal utility (or maximum willingness-to-pay) for each unit of your firm’s product.
Refer to a duopoly market in which the inverse demand function is given by P =...
Refer to a duopoly market in which the inverse demand function is given by P = 96 − Q. Firm 1's cost function is c(q1) = 6q1 + 300, and firm 2's cost function is c(q2) = 6q2 + 600 (such that each firm has MC = 6). Q1: The outputs of the two firms in Cournot-Nash equilibrium will be: 1) q1 = 45 and q2 = 0. 2) q1 = 30 and q2 = 30. 3) q1 = 45...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT