Question

In: Economics

1. The Bergen Company and the Gutenberg Company are the only two firms that produce and...

1. The Bergen Company and the Gutenberg Company are the only two firms that produce and sell a particular kind of machinery. The demand curve for their product is P= 580-3Q where P is the price of the product and Q is the total amount demanded. The total cost function of the Bergen Company is

TCB = 410QB where TCB is its total cost and QB is its output. The total cost function of the Gutenberg Company is TCG= 460QG where TCGis its total cost and QG is its output. There are competing for a new market.

b)     If only one firm enters a new market, how much will each firm produce and will make the profit?

c)      If both enter the new market, how much will each firm produce and will make the profit?

d)     Complete the game table matrix with the payoffs. What is the Nash EQ?

g)     Is this collusion would work? Why or why not?


Solutions

Expert Solution

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

The A Company and the B Company are the only two firms that produce and sell...
The A Company and the B Company are the only two firms that produce and sell a particular product. The inverse demand curve for their product is: P=19-0.5Q where Q=QA+QB The companies have identical cost functions: TCA=3+QA TCB=3+QB a) Suppose that the two companies are owned by Cournot duopolists. Find the output produced by each firm and the market price. Very briefly explain the steps you take in your solution. b)Instead of the Cournot assumption, assume Company A sets its...
Suppose that two identical firms produce widgets and that they are the only firms in the...
Suppose that two identical firms produce widgets and that they are the only firms in the market. Their costs are given by C1 = 60 Q1 and C2 = 60 Q2 where Q1 is the output of Firm 1 and Q2 is the output of Firm 2. Price is determined by the following demand curve: P= 2100 − Q where Q=Q1+Q2 Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium. (For all of the following, enter...
Suppose that two identical firms produce widgets and that they are the only firms in the...
Suppose that two identical firms produce widgets and that they are the only firms in the market. Their costs are given by C1=60Q1 and C2=60Q2 where Q1 is the output of Firm 1 and Q2 is the output of Firm 2. Price is determined by the following demand curve: P=2700−Q where Q=Q1+Q2 Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium. (For all of the following, enter a numeric response rounded to two decimal places.) When...
Suppose there are only two firms in the market, firm 1 and firm 2. They produce...
Suppose there are only two firms in the market, firm 1 and firm 2. They produce identical products. Firm 1 has a constant marginal cost where AC1 =MC1 =20, and firm 2 has a constant marginal cost AC2 =MC2 =8. The market demand function is given by Q = 100 - 0.5P. a) Find the Cournot Nash Equilibrium price and quantity, write down the profits for each firm. (Use "q1" to represent output level for firm 1, and "profit1" to...
Suppose there are two firms operating in a market. The firms produce identical products, and the...
Suppose there are two firms operating in a market. The firms produce identical products, and the total cost for each firm is given by C = 10qi, i = 1,2, where qi is the quantity of output produced by firm i. Therefore the marginal cost for each firm is constant at MC = 10. Also, the market demand is given by P = 106 –2Q, where Q= q1 + q2 is the total industry output. The following formulas will be...
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...
Suppose that two identical firms are selling a product and that they are the only firms...
Suppose that two identical firms are selling a product and that they are the only firms in the market. Total costs are Ci = 20Qi for each firm. The market demand curve is P = 80 – 0.5Q where Q = Q1 + Q2. The Cournot model describes the competition in this market. Using the above information, complete the below statements, a.)If these two firms collude, their combined output is equal to b.)If these two firms collude, each firm’s output...
Two identical firms compete in a Bertrand duopoly. The firms produce identical products at the same...
Two identical firms compete in a Bertrand duopoly. The firms produce identical products at the same constant marginal cost of MC = $10. There are 2000 identical consumers, each with the same reservation price of $30 for a single unit of the product (and $0 for any additional units). Under all of the standard assumptions made for the Bertrand model, the equilibrium prices would be Group of answer choices $10 for both firms $30 for both firms $50 for both...
The market consists of 2 firms. The firms produce the same product. Firm 1 with $1...
The market consists of 2 firms. The firms produce the same product. Firm 1 with $1 per-unit cost (C1(q1)=1q1 ). Firm 2 with $1 per-unit cost (C2(q2)=1q2 ). Firm 1 can set its price to 2 or 3 or 4 $. Firm 2 can set its price to 2 or 3 or 4 $. The industry's demand function is Q= 10 – P (P-price, Q- total quantities). The firms choose their quantities simultaneously. 1a) Find Firm 1 optimal price P1=?...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT