Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated...

Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated by an owner-manager who wishes to maximize profit. Firm 2 is managed by an revenue-maximizing manager whose pay is proportional to the firm's revenue. Firm 3 is a government-owned firm that has been instructed to maximize the amount of employment, L, subject to the constraint that revenue must not be negative.

Each of the three firms has a revenue function

R(q)equals=120120qminus−22q squaredq2

and a cost function of

C(q)equals=2020plus+4040q.

Determine how much output each firm chooses.

Firm 1 will produce such that

qequals=nothing

units

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Suppose that the widget industry consists of three firms. Their profit functions are below: D1 =...

Suppose that the widget industry consists of three firms. Their profit functions are below: D1 = (P1 - 10)(125 – 9P1 + 3P2 +2P3) D2 = (P2 – 10)(150 – 10P2 + 2P1 + 2P3) D3 = (P3 – 9)(110 – 8P3 + 2P1 + 2P2) Calculate the equilibrium prices numerically.

QUESTION 24 Consider two firms, Firm A and Firm B that have identical assets that generate...

QUESTION 24 Consider two firms, Firm A and Firm B that have identical assets that generate identical cash flows. Firm A has $10 million in debt and has 3 million shares outstanding. Firm A’s stock is traded at $10 per share. Firm B is all-equity firm with 5 million shares outstanding. Under the M&M world with perfect capital markets, what would be the stock price for Firm B? A. $8 B. $6 C. $10 D. $5 QUESTION 25 Under the...

Two identical firms (identical cost functions) operate on a market. For each of the following market...

Two identical firms (identical cost functions) operate on a market. For each of the following market demand curves and cost curves determine the Bertrand, Cournot, and Stackelberg outcomes (prices, quantities, and profits - for each firm, and at the market level). Also determine the collusive outcome (assuming the two firms form a cartel). Compare the outcomes. a) P = 200 − 2Q, T C = 50 + 10Q (PB = 10, PC = 73.33, PS = 57.5, PM = 105)...

Consider a competitive industry where all firms have identical cost functions C(y) = y^2 +1 if...

Consider a competitive industry where all firms have identical cost functions C(y) = y^2 +1 if y > 0 and C(0) = 0. Suppose that the demand curve for this industry is given by D(p) = 52 − p. (a) Find the individual supply curve of each firm. (b) Suppose there are n firms in the industry. Find the industry supply curve. (c) Find the price and quantity corresponding to a short-run market equilibrium assuming there are n firms in...

Supposed that you have two firms, ABC and XYZ. Both firm have an identical return on...

Supposed that you have two firms, ABC and XYZ. Both firm have an identical return on equity of 12%, but the market price of ABC stock is $25/share and the market price of XYZ is $50/share. Wxplain at least two potential reasons for disparity.

Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces...

Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces a demand function of: q1=70-2(p1)+1(p2) where q 1 is Firm 1's output, p1 is Firm 1's price, and p 2 is Firm 2's price. Similarly, the demand Firm 2 faces is: q2=70-2(p2)+1(p1) Solve for the Bertrand Equilibrium: In equilibrium (p1) equals _ and (p2) equals _

Suppose there are two firms, Firm A and Firm B that produce identical products in a...

Suppose there are two firms, Firm A and Firm B that produce identical products in a duopoly. Firm A has a constant marginal cost of production, MCA = 10 and Firm B has a constant marginal cost, MCB = 14. The market demand curve for the the product is given by P = 42 − 0.004Q where Q = (QA + QB). (a) Suppose that Firm A has a first-mover advantage. That is, Firm A is able to choose output...

All firms that produce taco meat have identical, long run, total cost functions given by: TC...

All firms that produce taco meat have identical, long run, total cost functions given by: TC = 225 + 6q + q2. Calculate the optimal firm size.

Consider two complementors: Firm 1 and Firm 2. Demand functions for firms 1 and 2 aregiven...

Consider two complementors: Firm 1 and Firm 2. Demand functions for firms 1 and 2 aregiven by Q1¿)=1600−200P1-100P2 Q2¿)=1600−200P2-100P1 Suppose that the marginal cost functions of firms 1 and 2 are given byMC1(Q1)=MC2(Q2)=0. What price should each firm charge to maximize its profit? Showyour calculation precisely

Suppose there are three identical firms engaged in quantity competition. The demand is P = 1...

Suppose there are three identical firms engaged in quantity competition. The demand is P = 1 − Q where Q = q1 + q2 + q3. To simplify, assume that the marginal cost of production is zero. Compute the Cournot equilibrium (i.e., quantities, price, and profits).

Subjects