The inverse market demand curve for bean sprouts is given by P(y ) = 100−2y ,...

The inverse market demand curve for bean sprouts is given by P(y ) = 100−2y , and the total cost function for any firm in the industry is given by TC(y)=4y. a. If the bean-sprout industry were perfectly competitive, what would be the industry output and price? b. Suppose that two Cournot firms operate in the market, and each firm has the above total cost function. Find the reaction functions of the two firms. c. Find the Cournot equilibrium output and price. d. For the Cournot case, draw the two reaction curves and indicate the equilibrium point on the graph. e. If the two firms decide to collude, what will be the industry output and price? f. Suppose one firm acts as a Stackleberg leader and the other firm behaves as a follower. Write down the maximization problem for the leader. g. What are the levels of output of the leader and follower? What is the industry price? Compare them to the Cournot case.

Solutions

Expert Solution

**if you liked the answer, then please upvote. Would be motivating for me. Thanks

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

Suppose that the market demand curve for bean sprouts is given by P = 880 -...

Suppose that the market demand curve for bean sprouts is given by P = 880 - 4Q, where P is the price and Q is the total industry output. Suppose that the industry has two firms, a Stackelberg leader and a follower. Each firm has a constant marginal cost of $80 per unit of output. In equilibrium, total output by the two firms will be 100. 50. 150. 200. 25.

Consider an oligopoly with 2 firms. The inverse demand curve is given by P = 100...

Consider an oligopoly with 2 firms. The inverse demand curve is given by P = 100 – Q1 – Q2. Firm 1’s total cost function is TC1 = 30Q1. Firm 2’s total cost function is TC2 = 20Q2. Assume now that the firms compete by choosing their prices simultaneously, so it is a Bertrand Oligopoly model. Assume that firms choose prices in 0.01 in intervals. (i.e. A firm can choose to charge $10.00 or $10.01, but not $10.005). a) Consider...

A firm with market power faces an inverse demand curve of P = 100 – 10Q....

A firm with market power faces an inverse demand curve of P = 100 – 10Q. Assume that the firm faces a marginal cost curve of MC = 10 + 10Q. (4)a. If the firm cannot price discriminate, what are the profit maximizing levels of output and price? (4)b. Given you answers in part “a,” what are the values of consumer surplus, producer surplus and deadweight welfare loss? (4)c. If the firm is able to practice first degree (perfect) price...

Consider a Monopolist where the inverse market demand curve for the produce is given by P...

Consider a Monopolist where the inverse market demand curve for the produce is given by P = 520 − 2Q. Marginal Cost: MC =100 + 2Q and Total Cost: 100 .50 2 TC = Q + Q + [1 + 1 + 1 = 3] Calculate: (a) Profit Maximizing Price and Quantity. (b) Single Price Monopolist Profit. (c) At the profit maximizing quantity, what is the Average Total Cost (ATC) for the Consider a Monopolist where the inverse market demand...

Suppose that the retail market for widgets has inverse demand curve P = 100 – Q....

Suppose that the retail market for widgets has inverse demand curve P = 100 – Q. Widget retailing is controlled by a monopoly retailer, R Inc., which obtains its widgets from the monopoly wholesaler W Inc. at a wholesale price of w per widget. In addition R Inc. incurs a cost of $2 per widget to promote the product and sell to consumers. Wholesaler W Inc. obtains the widgets in from monopoly manufacturer M Ltd. at a manufacturing price of...

A profit-maximizing monopolist operates in market with an inverse demand curve given by P = 20...

A profit-maximizing monopolist operates in market with an inverse demand curve given by P = 20 − Q and an associated marginal revenue MR = 20 − 2Q. Their marginal cost of production is constant at MC = 4. Assume for now that they have to sell each unit of output for the same price. a) Find the monopolist’s optimal choice of output and the socially efficient output. b) Sketch demand, marginal revenue, and marginal cost. Indicate on your diagram...

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".

Two firms produce a homogeneous product with an inverse market demand given by P = 100...

Two firms produce a homogeneous product with an inverse market demand given by P = 100 – 2Q, where Q = q1+q2. The first firm has a cost function given by C1=12q1and the second firm has a cost function given by C2=20q2. The firms make simultaneous output choices to maximize profit. Determine the equilibrium values of firm outputs, market output, price, and firm profits. With reference to question 1, now assume that decision-making is sequential with firm 1 choosing its...

Two firms produce a homogeneous product with an inverse market demand given by P = 100...

2. The inverse demand curve of a monopolist is given by: P = 200 −...

2. The inverse demand curve of a monopolist is given by: P = 200 − Q and the marginal cost is constant at $10, how does charging the monopoly a specific tax of τ=$12 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes the tax revenue)? Calculate the following: equilibrium price and quantity before the tax equilibrium price and quantity after the tax the change in consumer surplus the...

Subjects