Consider a 4-Firm Cournot market that is described by: p(Q)=100 - 0.2Q. Each firm faces no...

Consider a 4-Firm Cournot market that is described by: p(Q)=100 - 0.2Q. Each firm faces no fixed costs and a constant marginal cost of $10.

a) Describe the market equilibrium under the 4‐firm Cournot structure. That is:

i) How much output will be made in total? (Hint: the formula is given on page 190.)

ii) How much output will each firm make?

iii) What price will be charged? (Hint: the formula is given on page 190.)

b) How much dead‐weight loss is experienced in the market compared to a perfectly competitive market?

Hint #1:Solve for the perfectly competitive equilibrium.

Hint #2:If you graph the market solution under perfect competition and under a 4‐firm. (Cournot market, you should be able to identify the area associated with dead‐ weight loss. Keep in mind that the marginal cost curve is horizontal at a cost of $10 per unit of output made)

Solutions

Expert Solution

i hope this would help you ..if you like the work please appreciate thank you !

Rahul Sunny answered 2 weeks ago

Next > < Previous

Related Solutions

4. Consider a Cournot duopoly with inverse demand function P = 100 – Q. Firm 1’s...

4. Consider a Cournot duopoly with inverse demand function P = 100 – Q. Firm 1’s cost function is C1(q1) = 20q1, and firm 2’s cost function is C2(q2) = 30q2. Firms choose quantities once and simultaneously. (a) Write out each firm’s profit function. From these, derive the reaction functions of each firm, and solve for the Nash equilibrium quantities, price and profits. Illustrate your answer on a graph of the reaction functions (you do not need to draw isoprofit...

1 Consider two Cournot competitive firms – with the following market demand function P=100-Q. The firms...

1 Consider two Cournot competitive firms – with the following market demand function P=100-Q. The firms face constant marginal costs, MC1 = 5 whereas MC2 = 25. However, if they merge then the marginal production costs would fall to 5. Calculate the costs and benefits due to the merger for either firm. Is this merger Pareto improving for the economy? Explain. A Bertrand competition does not necessarily gravitate towards competitive prices in the equilibrium, with imperfect substitutes. In...

Consider a market with market demand P(Q) = 70 -8Q and each firm in the market...

Consider a market with market demand P(Q) = 70 -8Q and each firm in the market faces a total cost TC(Q) = 22Q. Suppose there is only one firm in the market. (a) What is the profit-maximizing price and quantity in the market? (b) What are the profits and consumer surplus? Now suppose we have a Cournot duopoly where firms choose quantities. (c) What is the equilibrium price and market quantity? (d) What is the consumer surplus and profits for...

Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms...

Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms have total costs,TC=10q where 10 is the marginal cost of production. ( Here Q represents total output in the market whereas q represents firm level output.) (b) Now assume that the firms collude. They again play a one-shot game. What is the output that each firm should produce in order to sustain the collusion? Find the market price, and profits of each firm. Are...

Consider a modified example from class. There are 3 Cournot competitors in the market with P(Q)...

Consider a modified example from class. There are 3 Cournot competitors in the market with P(Q) = 20 − Q. Marginal costs are MC1(q1) = 10 − q1, MC2(q2) = 9 and MC3(q3) = 6. Firms 1 and 2 decide to merge. Does firm 3 win or lose from this merger?

A monopolistically competitive firm faces the inverse demand curve P = 100 – Q, and its...

A monopolistically competitive firm faces the inverse demand curve P = 100 – Q, and its marginal cost is constant at $20. The firm is in long-run equilibrium. a. Graph the firm's demand curve, marginal revenue curve, and marginal cost curve. Also, identify the profitmaximizing price and quantity on your graph. b. What is the value of the firm's fixed costs? c. What is the equation for the firm's ATC curve? d. Add the ATC curve to your graph in...

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...

a.) Two identical firms compete as a Cournot duopoly. The market demand is P=100-2Q, where Q...

a.) Two identical firms compete as a Cournot duopoly. The market demand is P=100-2Q, where Q stands for the combined output of the two firms, Q=q1 +q2. The marginal cost for each firm is 4. Derive the best-response functions for these firms expressing what q1 and q2 should be. b.) Continuing from the previous question, identify the price and quantity that will prevail in the Cournot duopoly market c.) Now suppose two identical firms compete as a Bertrand duopoly. The...

Consider a market that faces the following market supply and demand functions Q S = 2 + p

Consider a market that faces the following market supply and demand functions Q S = 2 + p Q D = 10- 1/2 p where identical firms face the total cost function of T C = 4 + q + q2 a) What is the market price? b) Derive the average variable cost, average total cost, and marginal cost functions. c) In the short run, how much does each firm produce? d) In the short run, how much economic profit...

12. Suppose a monopoly firm faces the market demand Q = 500 – p and has...

12. Suppose a monopoly firm faces the market demand Q = 500 – p and has cost function C = 100 + Q2 . Find the firm’s profit, CS, PS, and DWL for the following scenarios: a. The monopoly firm charges a single price b. The monopoly firm perfectly price discriminate c. The monopoly firm adopts a block-pricing schedule with 2 quantity blocks

Subjects