Question
In: Economics
PROBLEM VIII. Suppose that, in a market of a certain good, there are two firms that...
PROBLEM VIII. Suppose that, in a market of a certain good, there are two firms that are engaged in an infinitely repeated Cournot competition. In each period, the inverse demand function is given by P(Q) = 200 − 4Q, where Q is the total supply of the good. Firm i (i = 1, 2) has the same cost function C(qi) = 8qi and the same discount factor δ, where 0 < δ < 1.
Q20. What is the Cournot equilibrium profit for each firm? (a) 861. (b) 1422. (c) 968. (d) 1024. (e) 798.
Q21. What is the collusive profit for each firm? (a) 1152. (b) 1328. (c) 1224. (d) 1720. (e) 1352.
Q22. What is the defection profit for a deviating firm? (a) 1664. (b) 921. (c) 1082. (d) 1752. (e) 1296.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Problem III. Suppose that, in a market of a certain good, there are firms that are...
Problem III. Suppose that, in a market of a certain good, there
are firms that are engaged in a Cournot competition. The inverse
demand function is given by P(Q) = 120 − 6Q, where Q is the total
supply of the good. All firms have the same cost function C(qi) =
30qi + 50.
Q7. What is the Cournot equilibrium price of the good when there
are N firms in the market?
(a) (30N + 200)/(N + 1) 2
(b)...
Suppose the market for a certain good has an inverse demand of ? = 180 −...
Suppose the market for a certain good has an inverse demand of ?
= 180 − ?. The aggregate private marginal cost for the firms that
produce the good is ?? = 20 + ?. However, production of the good
also creates pollution with an external marginal cost of ??? = 10 +
?/2.
If this is a perfectly competitive market with no regulation,
what is the equilibrium price and quantity produced?
Suppose instead that the market is a monopoly....
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...
Consider a market served by two firms: firm A and firm B. Demand for the good...
Consider a market served by two firms: firm A and firm B.
Demand for the good is given (in inverse form) by P(Q)=250−Q, where
Q is total quantity in the market (and is the sum of firm A's
output, qA, and firm B's output, qB) and P is the price of the
good. Each firm has a cost function of c(q)=10.00q, which implies
marginal cost of $10.00 for each firm, and the goods sold by firms
A and B are...
Suppose there are two firms in an instant coffee market. Market demand curve is given by...
Suppose there are two firms in an instant coffee market. Market
demand curve is given by P = 100 – 2Q, and marginal cost of
production for both firms are equal and constant at m=12.
a) Find the output that will maximize firm’s profit if the two
firms choose price simultaneously. What is the price that the firm
will charge and how much is the profit of each firm?
b) Find the output that will maximize firm’s profit if two...
Suppose there are two firms in an instant coffee market. Market demand curve is given by...
Suppose there are two firms in an instant coffee market. Market
demand curve is given by P = 100 – 2Q, and marginal cost of
production for both firms are equal and constant at m=12.
a) Find the output that will maximize firm’s profit if the two
firms choose price simultaneously. What is the price that the firm
will charge and how much is the profit of each firm? ( 10
marks)
b) Find the output that will maximize firm’s...
Suppose there are two firms in an instant coffee market. Market demand curve is given by...
Suppose there are two firms in an instant coffee market. Market
demand curve is given by P = 100 – 2Q, and marginal cost of
production for both firms are equal and constant at m=12.
a) Find the output that will maximize firm’s profit if two firms
choose quantity simultaneously. What is the price that they will
charge and how much is the profit of each firm?
b) Suppose the quantity game as in (b) is played by the firm...
Suppose there are only two firms, firm1 and firm2, in the market. They both choose a...
Suppose there are only two firms, firm1 and firm2, in the
market. They both choose
a quantity to produce simultaneously. The market price is
determined by the market
demand:
p =130-(Q1+Q2)
where Q1 is the output quantity of firm1 and Q2 is the output
quantity of firm2. Firm1’s
total cost of production is 10Q1 and firm2’s total cost of
production is 10Q2. That is, both
firms have a constant marginal cost of 10.
Task 1. What’s firm 1’s best response...
Suppose there are only two firms, firm1 and firm2, in the market. They both choose a...
Suppose there are only two firms, firm1 and firm2, in the
market. They both choose
a quantity to produce simultaneously. The market price is
determined by the market
demand:
p =130-(Q1+Q2)
where Q1 is the output quantity of firm1 and Q2 is the output
quantity of firm2. Firm1’s
total cost of production is 10Q1 and firm2’s total cost of
production is 10Q2. That is, both
firms have a constant marginal cost of 10.
Task 1. What’s firm 1’s best response...
Suppose two firms, "A" and "B," form a duopoly in the market for a special type...
Suppose two firms, "A" and "B," form a duopoly in the market for
a special type of computer chip. Each firm has a constant marginal
cost of $2. The daily market demand for this chip is given by the
following equation:
P = 8 – 0.005 Q = 8 – 0.005 (qA+qB).
a. Find an expression for firm #A's revenue, as a function of
its own quantity and firm B’s quantity: RevA(qA,qB). [Hint: By
definition, RevA = P qA. Here,...
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