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In: Economics

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.

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Rahul Sunny answered 7 months ago
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