Question
In: Economics
Assume two (2) firms in an industry producing a homogeneous product. Given the market demand as...
Assume two (2) firms in an industry producing a homogeneous product. Given the market demand as P = 100 -(q1+ q2), where q1 and q2 are output levels of firm 1 and firm 2 respectively; and the cost functions are as follows: C1= 30q1,and C2= 20q2:
i) Determine each firm’s profit-maximizing level of output (q1 and q2).Be sure to state each firm’s ‘reaction function’.(Cournot Solution!)
ii)How much profit does each firm make?
iii) What is the (total) industry output (Q)and market price (P)?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Consider an industry comprising two firms producing a homogeneous product. The market demand and total cost...
Consider an industry comprising two firms producing a
homogeneous product. The market demand and total cost equations
are: P=200-2(Q_1+Q_2 ); 〖TC〗_i=4Q_i, where i = 1, 2.
a. What is each firm’s reaction function?
b. What are the market-clearing price, and output and profit of
each firm?
Two firms produce a homogeneous product with an inverse market demand given by P = 100...
Two firms produce a homogeneous product with an inverse market
demand given by P = 100 – 2Q, where Q =
q1+q2. The first firm has a cost function
given by C1=12q1and the second firm has a
cost function given by C2=20q2. The firms
make simultaneous output choices to maximize profit. Determine the
equilibrium values of firm outputs, market output, price, and firm
profits.
With reference to question 1, now assume that decision-making
is sequential with firm 1 choosing its...
Two firms produce a homogeneous product with an inverse market demand given by P = 100...
Two firms produce a homogeneous product with an inverse market
demand given by P = 100 – 2Q, where Q =
q1+q2. The first firm has a cost function
given by C1=12q1and the second firm has a
cost function given by C2=20q2. The firms
make simultaneous output choices to maximize profit. Determine the
equilibrium values of firm outputs, market output, price, and firm
profits.
With reference to question 1, now assume that decision-making
is sequential with firm 1 choosing its...
Two firms compete in a homogeneous product market where the inverse demand function is P =...
Two firms compete in a homogeneous product market where the
inverse demand function is P = 10 -2Q (quantity is measured in
millions). Firm 1 has been in business for one year, while Firm 2
just recently entered the market. Each firm has a legal obligation
to pay one year’s rent of $0.5 million regardless of its production
decision. Firm 1’s marginal cost is $2, and Firm 2’s marginal cost
is $6. The current market price is $8 and was...
Two firms compete in a market to sell a homogeneous product with inverse demand function P...
Two firms compete in a market to sell a homogeneous product with
inverse demand function P = 600 − 3Q. Each firm produces at a
constant marginal cost of $300 and has no fixed costs. Use this
information to compare the output levels and profits in settings
characterized by Cournot, Stackelberg, Bertrand, and collusive
behavior.
Two firms compete in a homogeneous product market where the inverse demand function is P =...
Two firms compete in a homogeneous product market where the
inverse demand function is P = 20 -5Q (quantity
is measured in millions). Firm 1 has been in business for one year,
while Firm 2 just recently entered the market. Each firm has a
legal obligation to pay one year’s rent of $1 million regardless of
its production decision. Firm 1’s marginal cost is $2, and Firm 2’s
marginal cost is $10. The current market price is $15 and was...
Two firms compete in a market to sell a homogeneous product with inverse demand function P...
Two firms compete in a market to sell a homogeneous product with
inverse demand function P = 400 – 2Q. Each firm produces
at a constant marginal cost of $50 and has no fixed costs -- both
firms have a cost function C(Q) = 50Q.
If the market is defined as a Bertrand Oligopoly, what is the
market price?
Refer to the information above.
What is the total amount of Q produced in this market?
How much does firm 1...
In a Cournot Oligopoly market with the demand function p=220−0.5⋅Q there are 2 firms producing homogeneous...
In a Cournot Oligopoly market with the demand function
p=220−0.5⋅Q there are 2 firms producing homogeneous product. The
total cost functions of the first and second firm are
TC1=15+4⋅q1TC1=15+4⋅q1 and TC2=20+5⋅q2TC2=20+5⋅q2, respectively.
Firms choose their output levels simultaneously. Calculate the
output level for firm 1 in equilibrium. Round you answer to the
first decimal place.
Firms A and B are Cournot duopolists producing a homogeneous good. Inverse market demand is P...
Firms A and B are Cournot duopolists producing a homogeneous
good. Inverse market demand is P = 100 − Q , where P is market
price and Q is the market quantity demanded. Each firm has marginal
and average cost c = 40.
(a) The two firms propose to merge. Derive total output, market
price, profit and consumer surplus before the merger and after the
merger. Explain intuitively any changes you see to these variables
when the merger occurs.
(b)...
Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function...
Consider an industry consisting of two firms which produce a
homogeneous commodity. The industry demand function is Q= 100 − P,
where Q is the quantity demanded and P is its price. The total cost
functions are given as C1 = 50q1 for firm 1,
and C2 = 60q2 for firm 2, where Q
=q1 + q2. a. Suppose both firms are Cournot
duopolists. Find and graph each firm's reaction function. What
would be the equilibrium price, quantity supplied by...
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