Two firms have the same technology and pay the same wages for labor. They have identical...

Two firms have the same technology and pay the same wages for labor. They have identical factories, but firm 1 paid a higher price for its factory than firm 2 did. They both maximize their profits and have upward-sloping marginal cost curves. Explain whether our theory would predict firm 1 to have a higher output than firm 2.

Expert Solution

Rahul Sunny answered 2 years ago

Two identical firms compete in a Bertrand duopoly. The firms produce identical products at the same...

Two identical firms compete in a Bertrand duopoly. The firms produce identical products at the same constant marginal cost of MC = $10. There are 2000 identical consumers, each with the same reservation price of $30 for a single unit of the product (and $0 for any additional units). Under all of the standard assumptions made for the Bertrand model, the equilibrium prices would be Group of answer choices $10 for both firms $30 for both firms $50 for both...

There are two identical firms (A and B with the same total market value of equity...

There are two identical firms (A and B with the same total market value of equity (MVEt-1 = $20,000), total earnings (Et-1 = $1,000), same discount rate, same earnings persistence, etc. There is only one difference. Firm A has twice the number of shares outstanding (2,000 vs. 1,000) because A declared one 2:1 stock split in the past and B has never split its shares. Thus, B’s earnings per share (EPS) and stock price (P) is twice that of A’s....

Suppose we have two identical firms A and B, selling identical products. They are the only...

Suppose we have two identical firms A and B, selling identical products. They are the only firms in the market and compete by choosing quantities at the same time. The Market demand curve is given by P=200-Q. The only cost is a constant marginal cost of $17. Suppose Firm A produces a quantity of 50 and Firm B produces a quantity of 50. If Firm A decides to increase its quantity by 1 unit while Firm B continues to produce...

Two oligopolies (Firm A and Firm B) have access to the same the same technology and...

Two oligopolies (Firm A and Firm B) have access to the same the same technology and have similar costs. FC = 0 MC = AVC = ATC = $100 Assume the demand of the product is given below: P=1000-Q Remember Q= q_A+ q_B Where q_(A ) is production by firm A and q_B-is production by firm B c) Now assume that the firms compete by setting quantities and they both move at the same time. Assume that the reaction functions...

Assume in a Bertrand model, there are 3 identical firms in the market with the same...

Assume in a Bertrand model, there are 3 identical firms in the market with the same constant marginal cost of 30. The demand function is P = 150 ? Q. Firms share the monopoly profit equally if they participate in the cartel. With probability 0.3 the cartel is detected by the end of period t, in which case each cartel member has to pay the fine $1000. Cartel investigation takes one period. If detected by the end of period t,...

Assume in a Cournot model, there are 3 identical firms in the market with the same...

Assume in a Cournot model, there are 3 identical firms in the market with the same constant marginal cost of 30. The demand function is P = 150 ? Q. Firms share the monopoly profit equally if they participate in the cartel. Suppose that the market game is now repeated indefinitely. Derive the condition under which the collusion/cartel will be successful. (Hint: show the range of the probability adjusted discount factor ? that makes the cartel sustainable.)

There is a __________ between two identical objects that have been charged in the same way....

There is a __________ between two identical objects that have been charged in the same way. Choose one from below and explain. a) short range repulsive force b) short range attractive force c) long range repulsive force d) long range attractive force

Consider two firms, X and Y, that have identical assets and generate identical cash flows. X...

Consider two firms, X and Y, that have identical assets and generate identical cash flows. X is an all-equity firm, with 1 million shares outstanding that trade for a price of $24 per share. Y has 2 million shares outstanding and $12 million dollars in debt at an interest rate of 5%. According to MM proposition 1, share price of y is $6. a) If the annual earnings before interest and taxes for each firm are $5 million, what would...

Suppose the natural gas industry consisted of only two firms. Let these firms have identical cost...

Suppose the natural gas industry consisted of only two firms. Let these firms have identical cost functions, C(q) = 40q. Assume the demand curve for the industry is given by P = 100 − Q and that each firm expects the other to behave as a Cournot competitor. a) Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output level that maximizes its profits when taking its rival’s output as given. What are the profits of each...

Suppose that two identical firms produce widgets and that they are the only firms in the...

Suppose that two identical firms produce widgets and that they are the only firms in the market. Their costs are given by C1 = 60 Q1 and C2 = 60 Q2 where Q1 is the output of Firm 1 and Q2 is the output of Firm 2. Price is determined by the following demand curve: P= 2100 − Q where Q=Q1+Q2 Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium. (For all of the following, enter...

Question