Question

In: Economics

Consider that two firms, A and B, compete. They can choose different strategies—a combination of low...

Consider that two firms, A and B, compete. They can choose different strategies—a combination of low price or high quality. The accompanying tables show the best practice frontiers for each firm.

A’s Possibilities

Price      Quality

  1. 12
  2. 8
  3. 4
  4. 0

B’s Possibilities

Price                      Quality

0                      6

2                      4

4                      2

6                      0

What is the cost to A of 1 unit of high quality?

What is the cost to B of 1 unit of high quality?

What is the cost to A of 1 unit of price? What is the cost to B of 1 unit of price? Which firm should focus on high quality? Which on low Price? Explain

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related 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. (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...
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...
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 the following payoff matrix for two firms, Airbus (A) and Boeing (B). The firms can...
Consider the following payoff matrix for two firms, Airbus (A) and Boeing (B). The firms can each produce either 3 or 4 planes per week. The table below shows the profit from each of those options. Each firm knows all the information in the table below. They each make their decisions independently. Airbus's Options 4 planes per week 3 planes per week Boeing's Options 4 planes per week A = $32 million B = $32 million A = $30 million...
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
Two firms compete in selling identical widgets. They choose their output levels Upper Q1 and Q2...
Two firms compete in selling identical widgets. They choose their output levels Upper Q1 and Q2 simultaneously and face the demand curve: P=100? Q, where Q=Q1+Q2. Until recently, both firms had zero marginal costs. Recent environmental regulations have increased Firm 2's marginal cost to $50. Firm 1's marginal cost remains constant at zero. True or false: As a result, the market price will rise to the monopoly level. As a result of Firm 2's marginal cost rising to $50 ,...
Consider two firms that sell differentiated products and compete by choosing prices. Their demand functions are...
Consider two firms that sell differentiated products and compete by choosing prices. Their demand functions are Q1 = 72 – 3P1 + 2P2 and Q2 = 72 – 3P2 + 2P1 where P1 and P2 are the prices charged by firm 1 and 2, respectively, and Q1 and Q2 are the corresponding demands. All production costs are assumed to be zero. (a) Suppose the two firms set their prices simultaneously and non-cooperatively. Find the resulting Bertrand-Nash equilibrium. What price does...
1. Choose two firms that compete within the same industry (e.g., J.C. Penney and Sears, Johnson...
1. Choose two firms that compete within the same industry (e.g., J.C. Penney and Sears, Johnson & Johnson and Merck, Ford and GM). 2. Go to each firm's website, and then access and download their annual reports (financial statements). 3. Using the accounting data from the firms' financial statements and the ratios studied in Chapter 9 of the textbook, calculate all ratios for each firm (liquidity ratios, activity ratios, profitability ratios, leverage ratios, and coverage ratios). 4.Analyze and compare your...
Consider a duopoly where two firms X and Y compete over quantities. They make their output...
Consider a duopoly where two firms X and Y compete over quantities. They make their output decisions simultaneously. The firms have the same cost function which reads: TCi = 100+50qi where TCi are total cost in dollar and qi is the quantity produced by each firm. The total output in the industry is given by Q = qx +qy , the inverse demand function reads: P(Q) = 350?2Q 1.Calculate the reaction functions of both firms and find the optimal level...
Two firms are in a market and are able to compete on quantity, as is typical...
Two firms are in a market and are able to compete on quantity, as is typical in a Cournot Oligopoly. The market demand curve is Q = 30 – 3P. The market marginal revenue curve is: MR= 10-(2/3)Q The two firms have different marginal costs. Firm A has a marginal cost of $6, while Firm B has a marginal cost of $9. (a) Find the demand curve that Firm A faces. (b) Assume that Firm A knows that Firm B...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT