Question
In: Economics
N firms compete in a Cournot oligopoly. Each firm can produce at a constant average and...
N firms compete in a Cournot oligopoly. Each firm can produce at a constant average and marginal cost of AT C = MC = $5. Firms face a market demand demand curve given by Q = 53 − P. Where Q is the market quantity demanded with Q = Q1 + Q2 + .........QN 1. Find each firm’s reaction function taking into account that the firms are identical. 2. Calculate the Cournot-Nash equilibrium. What are the resulting market price and profits of each firm? 3. Show that as N becomes large, the market price approaches the price that would prevail under perfect competition. Hint: your answers will be functions of N.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Three firms produce ethanol and compete in a Cournot oligopoly. Each firm has the same cost...
Three firms produce ethanol and compete in a Cournot oligopoly.
Each firm has the same cost function, ??(?) = 1/ 2 ?. Market demand
is given by ? = 600 − ?. The quantities produced by the three firms
are respectively ?1,?2,?3.
(a) What is firm 1’s optimal quantity as a function of
?2 and ?3?
(b) What is the total quantity produced by all three firms?
Cournot Oligopoly and Number of Firms In a Cournot oligopoly, each firm assumes that its rivals...
Cournot Oligopoly and Number of Firms In a Cournot oligopoly,
each firm assumes that its rivals do not change their output based
on the output that it produces. Illustration: A Cournot oligopoly
has two firms, Y and Z. Y observes the market demand curve and the
number of units that Z produces. It assumes that Z does not change
its output regardless of the number of units that it (Y) produces,
so chooses a production level that maximizes its profits....
Two firms compete with quantities as in Cournot. Each firm has a marginal cost of $12....
Two firms compete with quantities as in Cournot. Each firm has a
marginal cost of $12. The industry demand is P=48-2Q. How much
output will each firm produce individually?
in Cournot Oligopoly, Each firm believes rivals will hold their output constant if it changes its...
in Cournot Oligopoly, Each firm believes rivals will hold their
output constant if it changes its output. <- what does it mean
by this ? can anyone explain in detail?
Two firms compete under Cournot competition with constant marginal costs c1 = 2 and c2 =...
Two firms compete under Cournot competition with constant
marginal costs c1 = 2 and c2 =
4. The market demand is P=18-Q .
a) Compute the market share of each firm, the market price, and
the total quantity produced in the market.
b) [CHALLENGING] You later hear that the
marginal cost of firm 2 increased, and realize that the market
price is now P = 9. What is the new marginal cost
c2 ?
Two firms in an oligopoly compete as a leader and follower (the standard two-firm Stackelberg model)....
Two firms in an oligopoly compete as a leader and follower (the
standard two-firm Stackelberg model). The market demand is
represented by the equation:
p = 6500 - 25Q.
Each firm has constant MC = AC = 500 (with no fixed costs).
What will be the follower's profit? (Round
answer to nearest whole number
A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10....
A Cournot oligopoly consists of four firms, each with a marginal
cost of production of MC=10. The market demand curve is given by
Q=(100-P)/3 . The four firms are looking to merge into a single
firm so they can increase their profit margin by taking advantage
of scale economies. Suppose that after the merger, market demand
remains the same but the marginal cost of production of the merged
firm decreases to MC=4.
26. What is the change in net social...
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...
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...
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