A dominant or price setting firm and several smaller price takers serve a market where total market demand is Qd = 560-2P and the combined supply from all the smaller firms is Qs=-60+2P. Does this market meet the assumptions that the dominant firm has at least a market share of 50%? (you must motivate your answer numerically)
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- A dominant or price setting firm and several smaller price takers serve a market where total market demand is Qd = 560 – 2P and the combined supply from all the smaller firms is Qs = - 60 + 2P. Does this market meet the assumptions that the dominant firm has at least a market share of 50%? (you must motivate your answer numerically)Consider an industry with N firms that compete by setting the quantities of an identical product simultaneously. The resulting market price is given by: p = 1000 − 4Q. The total cost function of each firm is C(qi) = 50 + 20qi . (a) Derive the output reaction of firm i to the belief that its rivals are jointly producing a total output of Q-i . Assuming that every firm produces the same quantity in equilibrium, use your answer to compute that quantity. (b) Suppose firms would enter (exit) this industry if the existing firms were making a profit (loss). Write down a mathematical equation, the solution to which would give you the equilibrium number of firms in this industry. You don’t have to solve this equation.You manage a company that competes in an industry that is comprised of 3 equal-sized firms that produce similar products. A recent industry report indicates that the market is fairly saturated, in that a 10 percent industry-wide price increase would lead to a 22 percent decline in units sold by all firms in the industry. Currently, Congress is considering legislation that would impose a tariff on a key input used by the industry. Your best estimate is that, if the legislation passes, your marginal cost will increase by 1 dollar. Based on this information, what price increase would you recommend if the tariff legislation is passed by Congress? Instructions: Enter your response rounded to the nearest penny (two decimal places).
- Two firms face the same inverse demand curve: P= 370– q, – 92 . Both firms have the same constant marginal cost: MC = 10. (a) %3D if both firms choose their output levels simultaneously, how much profits and consumer surplus will be earned in equilibrium? (b) Firm 1 is offered the following deal: by paying Z it can either (i) acquire a new technology that lowers its marginal cost to zero or (ii) have to opportunity to produce output before firm 2. Which option would it take and what is the maximum Z it would be willing to pay?The marginal cost of a product is fixed at MC = 20. The demand for the product is Q = 100 - 2P. (a) Now consider a Cournot model with two firms that are choosing quantities simultaneously. What is the best reply (best response) function for each firm? What is theNash equilibrium? What is the total surplus? (b)What do you expect the total surplus would be with three firms? Why? (You do not need to calculate an exact value. You can say ”total surplus is at least 100”, or ”total surplus is at most 80”)Here is a market with three firms: 1, 2, and 3. The demand curve is P=100-Q. There is no fixed cost but the marginal cost 10 for all firms. Firm 1 is a leader firm so that it decides the quantity Q1 first. Then two firms respectively decide their quantities Q2 and Q3 simultaneously. 1) At an equilibrium (SPE), Q1 is Q2=Q3= 2) At the equilibrium, (the market quantity) Q= and (the market price) P= 3) The profit of firm 1 is while the profit of firm 2 and 3 respectively is
- Suppose we have two identical firms A and B, selling identical products. They are the only firms in the market and compete by choosing quantities at the same time. The Market demand curve is given by P=477-Q. The only cost is a constant marginal cost of $16. Suppose Firm A produces a quantity of 66 and Firm B produces a quantity of 49. If Firm A decides to increase its quantity by 1 unit while Firm B continues to produce the same 49 units, what is the Marginal Revenue for Firm A from this extra unit? Enter a number only, no $ sign. Don't forget to include the negative sign if revenue decreases.Question Consider a market with an inverse demand Function p = 60 -4*Q. There are two firms, an incumbent and an entrant. There is a constant variable cost of 6 and a unit capacity cost of 6. In the first stage, the incumbent chooses capacity. In the second stage, the entrant decides whether or not to enter and all active firms choose quantities (where the entrant also has to simultaneously choose its capacity in the second stage, if it enters). a. For a capacity of 5 units, what is the best response function of the incumbent in the second period? b. What is the Cournot-Nash equilibrium of the second stage if the incumbent chose a capacity of 5 units in the first stage conditional on the entrant entering? c. For a capacity of an arbitrary k units, what is the best response function of the incumbent? d. What is the Cournot-Nash equilibrium of the second stage if the incumbent chose a capacity of k units in the first stage conditional on the entrant entering? e. Solve for the subgame…PROBLEM (5) In a dominant firm market with demand Q = 30 - p, the dominant firm has MC(Q) = 2Q (that is, with TC(Q) = Q²) and the fringe is composed of 5 identical firms, each with MC(Q) = 10Q (that is, with TC(Q) = 5Q²). (a) Calculate the market price in the dominant firm model. Calculate the quantity produced by the fringe. (b) Now assume that the 5 fringe firms form a “union", and act as 5 "plants" of the union firm and this union firm competes as one single firm against the dominant firm in quantities, as in Cournot competition. What is the Cournot-Nash equilibrium price and quantity in this market organization? (c) Now, the dominant firm convinces the "union" not to compete with it but instead collude (to maximize the sum of profits) to form a cartel. What is the market price and quantity? (d) Back to the problem description. If all the firms (the dominant firm and the 5 fringe firms) acted as price takers, as in the perfect competition, what would be the market equilibrium price…
- PROBLEM (5) In a dominant firm market with demand Q = 30 − p, the dominant firm has MC(Q) = 2Q (that is, with TC(Q) = Q^2) and the fringe is composed of 5 identical firms, each with MC(Q) = 10Q (that is, with TC(Q) = 5Q^2). (a) Calculate the market price in the dominant firm model. Calculate the quantity produced by the fringe. (b) Now assume that the 5 fringe firms form a “union”, and act as 5 “plants” of the union firm and this union firm competes as one single firm against the dominant firm in quantities, as in Cournot competition. What is the Cournot-Nash equilibrium price and quantity in this market organization? (c) Now, the dominant firm convinces the “union” not to compete with it but instead collude (to maximize the sum of profits) to form a cartel. What is the market price and quantity? (d) Back to the problem description. If all the firms (the dominant firm and the 5 fringe firms) acted as price takers, as in the perfect competition, what would be the market equilibrium…This is a Microeconomics problem. Two firms A and B operating in the same market must choose between a collude price and a cheat price. Answer the following questions in order. (a) Does Firm A have a dominant strategy? Explain your answer. (b) Does Firm B have a dominant strategy? Explain your answer. (c) Is there an equilibrium solution to the above game? (d) Is this equilibrium solution to the game the most "ideal" outcome for the players? Explain clearly why or why not.An Australian firm and a US firm produce a homogeneous good that is sold only in Japan. The marginal cost of producing the good is constant and equal to 30 in both countries. The demand curve for the good in Japan is: P = 120-Q where Q = QA +QUS represents the sum of the quantities. produced by the Australian and the US firms, respectively. (b) Assume the Australian firm can commit to an output before the US firm. Solve for the Stackelberg Equilibrium price, sales and profits of each firm in Japan. Price profit AUS2 ,output_US2 profit_US2 output_AUS2