Question
In: Economics
Two firms, A and B, compete as duopolists in an industry. The firms produce a homogeneous...
Two firms, A and B, compete as duopolists in an industry. The
firms produce a homogeneous good. Each firm has a cost function
given by:
C(q) = 30q + 1.5q2
The (inverse) market demand for the product can be written as:
P =300−3Q, where Q = q1 + q2, total output.
(a) If each firm acts to maximize its profits, taking its
rival’s output as given (i.e., the firms behave as Cournot
oligopolists), what will be the equilibrium quantities selected by
each firm? What is total output, and what is the market price? What
are the profits for each firm?
It occurs to the managers of Firm A and Firm B that they could
do a lot better by colluding. If the two firms collude, what would
be the profit-maximizing choice of output? The industry price? The
output and the profit for each firm in this case?
Suppose Firm A (leader) can set its output level before Firm B
(follower) does. Use backward induction method to determine how
much will Firm A choose to produce in this case? How much will Firm
B produce? What is the market price, and what is the profit for
each firm? Is firm A better off by choosing its output first?
Explain why or why not.
what is the utility?
Solutions
Rahul Sunny answered 7 months agoRelated Solutions
Two firms, A and B, compete as duopolists in an industry. The firms produce a homogeneous...
Two firms, A and B, compete as duopolists in an industry. The
firms produce a homogeneous good. Each firm has a cost function
given by: C(q) = 30q + 1.5q2 The (inverse) market demand
for the product can be written as: P = 300 − 3Q , where Q = q1 +
q2, total output.
Question: If each firm acts to maximize its profits, taking its
rival’s output as given (i.e., the firms behave as Cournot
oligopolists), what will be...
Two firms, a and b, compete in a market to sell homogeneous products with inverse demand...
Two firms, a and b, compete in a market to sell homogeneous
products with inverse demand function P = 400 – 2Q where Q =
Qa + Qb. Firm a has the cost function
Ca = 100 + 15Qa and firm b has the cost
function Cb = 100 + 15Qb. Use this
information to compare the output levels, price and profits in
settings characterized by the following markets:
Cournot
Stackelberg
Bertrand
Collusion
Consider two firms, Firm A and Firm B, who compete as duopolists. Each firm produces an...
Consider two firms, Firm A and Firm B, who compete as
duopolists. Each firm produces an identical product. The total
inverse demand curve for the industry is
P=250-QA+QB.
Firm A has a total cost curve
CAQA=100+QA2.
Firm B has a total cost curve
CBQB=100+2QB.
Suppose for now, only Firm A exists
(QB=0). What is the Monopoly equilibrium
quantity and price? What is Firm A’s profit?
Find the Nash Cournot equilibrium price and output level. What
are the firms’ profits?
Find...
Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function...
Consider an industry consisting of two firms which produce a
homogeneous commodity. The industry demand function is Q= 100 − P,
where Q is the quantity demanded and P is its price. The total cost
functions are given as C1 = 50q1 for firm 1,
and C2 = 60q2 for firm 2, where Q
=q1 + q2. a. Suppose both firms are Cournot
duopolists. Find and graph each firm's reaction function. What
would be the equilibrium price, quantity supplied by...
Firms A and B are Cournot duopolists producing a homogeneous good. Inverse market demand is P...
Firms A and B are Cournot duopolists producing a homogeneous
good. Inverse market demand is P = 100 − Q , where P is market
price and Q is the market quantity demanded. Each firm has marginal
and average cost c = 40.
(a) The two firms propose to merge. Derive total output, market
price, profit and consumer surplus before the merger and after the
merger. Explain intuitively any changes you see to these variables
when the merger occurs.
(b)...
Two firms compete in a homogeneous product market where the inverse demand function is P =...
Two firms compete in a homogeneous product market where the
inverse demand function is P = 10 -2Q (quantity is measured in
millions). Firm 1 has been in business for one year, while Firm 2
just recently entered the market. Each firm has a legal obligation
to pay one year’s rent of $0.5 million regardless of its production
decision. Firm 1’s marginal cost is $2, and Firm 2’s marginal cost
is $6. The current market price is $8 and was...
Two firms compete in a market to sell a homogeneous product with inverse demand function P...
Two firms compete in a market to sell a homogeneous product with
inverse demand function P = 600 − 3Q. Each firm produces at a
constant marginal cost of $300 and has no fixed costs. Use this
information to compare the output levels and profits in settings
characterized by Cournot, Stackelberg, Bertrand, and collusive
behavior.
Two firms compete in a homogeneous product market where the inverse demand function is P =...
Two firms compete in a homogeneous product market where the
inverse demand function is P = 20 -5Q (quantity
is measured in millions). Firm 1 has been in business for one year,
while Firm 2 just recently entered the market. Each firm has a
legal obligation to pay one year’s rent of $1 million regardless of
its production decision. Firm 1’s marginal cost is $2, and Firm 2’s
marginal cost is $10. The current market price is $15 and was...
Two firms compete in a market to sell a homogeneous product with inverse demand function P...
Two firms compete in a market to sell a homogeneous product with
inverse demand function P = 400 – 2Q. Each firm produces
at a constant marginal cost of $50 and has no fixed costs -- both
firms have a cost function C(Q) = 50Q.
If the market is defined as a Bertrand Oligopoly, what is the
market price?
Refer to the information above.
What is the total amount of Q produced in this market?
How much does firm 1...
Suppose that firms A,B,C and D are Bertrand duopolists in the salt industry. The market demand...
Suppose that firms A,B,C and D are Bertrand duopolists in the
salt industry. The market demand curve can be specified as
Q=100-3p, Q=qA+qB+qC+qD. The cost of firm A is C(qA)=7qA The cost
of firm B is C(qB)=3qB The cost of firm C is C(qC)=7qC The cost of
firm D is C(qD)=5qD
Firm A will earn?
Firm B will earn?
Firm C will earn?
Firm D will earn?
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