Question
In: Economics
5. In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And...
5. In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And the marginal cost and average cost of each firm is constant: AC=MC=2 a. Solve for firm 1’s reaction curve and graph b. Solve for firm 2’s reaction curve and graph c. Solve for each firm’s Q and P in a cournot equilibrium and show on your graph i. What is the profit for each firm?
6. Now assume the same market demand curve as question 5 , but the firms are now colluding. a. What is the collusion P, Q? b. Add the collusion curve to your graph above. c. What are profits?
7. What if question 5 demand curve was in a competitive equilibrium. a. What would the P, Q be? b. What would profits be?
8. Go back to your question 5 demand curve. Now assume firm 1 makes their decision about output first (Stackelberg Model). a. How much will they choose to produce? b. How much will firm 2 choose to produce? c. Calculate profit for firm 1 and firm 2. What does this tell you about being first mover?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And the...
In a duopoly market with two identical firms, the market demand
curve is: P=50-2Q And the marginal cost and average cost of each
firm is constant: AC=MC=2 a. Solve for firm 1’s reaction curve and
graph b. Solve for firm 2’s reaction curve and graph c. Solve for
each firm’s Q and P in a cournot equilibrium and show on your graph
i. What is the profit for each firm?
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...
Suppose there are two identical firms A and B facing a market demand P=280-2Q. Both firms...
Suppose there are two identical firms A and B facing a market
demand P=280-2Q. Both firms have the same average and marginal cost
AC=MC=40.
Assume that firms are Cournot-competitors (in quantity). Find
the equilibrium price, quantity and profits.
Assume that firms are Stackelberg-competitors (in quantity) and
Firm A is the leading firm. Find the equilibrium price, quantity
and profits.
What general conclusions can you derive from the answers that
you found in (a) & (b)?
Suppose there are two identical firms A and B facing a market demand P=100-2Q. Both firms...
Suppose there are two identical firms A and B facing a market
demand P=100-2Q. Both firms have the same marginal cost MC=4.
Assume that firms are Cournot-competitors (in quantity). Find
the equilibrium price, quantity and profits.
Assume that firms are Stackelberg-competitors (in quantity) and
Firm A is the leading firm. Find the equilibrium price, quantity
and profits.
What general conclusions can you derive from the answers that
you found in (a) & (b)?
Consider an industry which has a market demand curve given by P=260−2Q. There are two firms...
Consider an industry which has a market demand curve given by
P=260−2Q. There are two firms who are Cournot competitors. Firm 1
has marginal costc1=80 and firm2 has marginal costc2=20.
(a) [10 points] Find the Nash equilibrium quantities for these
two firms.
(b) [20 points] Use the quantities you found in part (a) to find
the profits for each firm and the market-clearing price.
(c) [20 points] Suppose these firms decide to form a cartel and
collude. The firms will...
Two firms operate in a Cournot duopoly and face an inverse demand curve given by P...
Two firms operate in a Cournot duopoly and face an inverse
demand curve given by P = 200 - 2Q, where Q=Q1+Q2 If each firm has
a cost function given by C(Q) = 20Q, how much output will each firm
produce at the Cournot equilibrium?
a. Firm 1 produces 45, Firm 2 produces 45.
b. Firm 1 produces 30, Firm 2 produces 30
c. Firm 1 produces 45, Firm 2 produces 22.5
d. None of the above.
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P...
Demand in a market
dominated by two firms (a Cournot duopoly) is determined according
to: P = 300 – 4(Q1 + Q2), where P is the
market price, Q1 is the quantity demanded by Firm 1, and
Q2 is the quantity demanded by Firm 2. The marginal cost
and average cost for each firm is constant; AC=MC = $77.
The cournot-duopoly
equilibrium profit for each firm is _____.
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P...
Demand in a market dominated by two firms (a Cournot duopoly) is
determined according to: P = 300 – 4(Q1 +
Q2), where P is the market price, Q1 is the
quantity demanded by Firm 1, and Q2 is the quantity
demanded by Firm 2. The marginal cost and average cost for each
firm is constant; AC=MC = $68.
The cournot-duopoly equilibrium profit for each firm is
_____.
Hint: Write your answer to two decimal places.
Assume there is a duopoly. Assume that the market demand is : P=100-2Q Assume the good...
Assume there is a duopoly. Assume that the market demand is :
P=100-2Q Assume the good can be
produced at a constant marginal cost of 0 and that both firms have
the same cost. Assume the firms act like Cournot firms.
1. What is the equation for firm 1’s demand curve?
2. What it the equation for firm 2’s demand curve?
3. What is the equation for firm 1’s reaction function?
4. What is the equation for firm 2’s reaction...
Consider two identical firms in a Cournot competition. The market demand is P = a –...
Consider two identical firms in a Cournot competition. The
market demand is P = a – bQ. TC1 = cq1 =
TC2 = cq2 .
Find the profit function of firm 1.
Maximize the profit function to find the reaction function of
firm 1.
Solve for the Cournot-Nash Equilibrium.
Carefully discuss how the slope of the demand curve affects
outputs and price.
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