Consider two oligopolistic firms (Firm 1 and Firm 2) in a price-setting duopoly. Both firms have no marginal costs (MC = 0) but do have fixed costs F, = 10, i = 1, 2. The demand functions for Firm 1 and Firm 2 are given by q, = 13 - 2p, + p, and q, = 13 - 2p, +P,, respectively. A. Calculate the values of profit-maximizing quantities and prices for Firm 1 and Firm 2, and their respective profits. B. If the two firms are working together and collude on price (p, = p, = p), find the new %3D collusion price.

Consider two oligopolistic firms (Firm 1 and Firm 2) in a price-setting duopoly. Both firms have no marginal costs (MC = 0) but do have fixed costs F, = 10, i = 1, 2. The demand functions for Firm 1 and Firm 2 are given by q, = 13 - 2p, + p, and q, = 13 - 2p, +P,, respectively. A. Calculate the values of profit-maximizing quantities and prices for Firm 1 and Firm 2, and their respective profits. B. If the two firms are working together and collude on price (p, = p, = p), find the new %3D collusion price.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

See similar textbooks

Similar questions

Consider two Cournot oligopolists, firm 1 and firm 2, in a homogenous product market. The market demand is P = 100 - 3Q and each firm has a constant marginal cost MC=10. The market price of equilibrium and total quantity in the market is: Select one: O a. P* 30 and Q* = 20 O b. P* 40 and Q* = 20 ○ C. P* 40 and Q* = 30 d. P20 and Q* = 30
bok rint An oligopoly producing a homogeneous product is comprised of three firms that act like a cartel. Assume that these three firms have identical cost schedules. Assume also that if any one of these firms sets a price for the product, the other two firms charge the same price. As long as they all charge the same price they will share the market equally; and the quantity demanded of each will be the same. Below is the total-cost schedule of one of these firms and the demand schedule that confronts it when the other firms charge the same price as this firm. Complete the marginal-cost and marginal- revenue schedules facing the firm. erences Mc Graw Hill Output Total cost Marginal cost Price Quantity demanded Marginal revenue 0 1 23456 7 8 $0 180 300 480 720 1,020 1,380 1,800 2,280 Short Anewor LA JUL 26 $780 720 660 600 540 480 420 360 Toolbar navigation (a) What price would be charged, what output would be produced, and what profit would be made by this firm? (b) If the firms…
What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q= 1,800 - 1,000p. and each firm's marginal cost is $0.28 per unit? The Cournot-Nash equilibrium occurs where q, equals and 92 equals (Enter numenic responses using real numbers rounded to two decimai places.) Furthermore, the equilibrium occurs at a price of $ (Round your answer to the nearest penny.)
1. Consider two duopolists who each have a constant marginal cost c = e2 = 3 and face inverse demand P = 15 – Q,where Q = Q1 + Q2 is the total output of both firms. 1. Find the Cournot equilibrium quantity for each firm, the resulting market price, and the profits for each firm. 2. Find the Stackelberg equilibrium quantities for each firm, and the price, and the profits for each firm supposing that Firm 1 is the industry leader. 3. Suppose that Firm 2 figures out a way to lower its marginal cost to ez = 0 while firm 1 still has a marginal cost equal to 1: c = 3. How does this affect the Cournot equilibrium quantities, price, and profits? 4. How does this affect the Stackelberg equilibrium (with Firm 1 still as the leader) quantities, price, and profits?
1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore 1 P(QM) = 780 -Q=780 -0.02222QM 45 QM is total market production (i.e., combined production of firm's A and B. That is: Q(P) = 35, 100- 45P 2M = A +QB As a result, the inverse demand curve for each firm is: P(QA, QB) = 780- -1/32₁-752 45 Unlike the example in class, the two firms have different costs. = 4000A TCA (QA) TCB (QB) = 260QB = 780 -0.022220A -0.02222QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces Qg, calculate what firm A's best response is to firm B’s decision to produce QB- Note: Firm A's best response should be a function of B
The inverse demand function in a market is given by P = 500- Q. The fırms that operate in this market have zero fixed costs, and constant marginal costs equal to MC = 2O. %3D
Help me please
If firm 1 and firm 2 are the oligopolistic firms in bottled spring water production in Nomansland. The market demand is given by ? = 5000 −20?, Qd is the number of kilolitres demanded per month while P is the price of kilolitres of bottled water. The marginal cost of a kilolitre of bottled water is R10.How do I Find the Cournot equilibrium quantities and price? and how do I Find the Cournot profits and the monopolist profits?
Cournot Duopoly Suppose that Coca Cola and Pepsi companies compete in quantity sold in a small town. The market demand function for soda in the small town is given by the demand function: Q 10,000 P where Q is the aggregate quantity demanded and P is the price of a can of soda. Let Qp be the number of cans of soda sold by the Pepsi company and Qc be the number sold by the Coca Cola company. Assuming that the marginal cost of producing a can of soda is the same for both companies and equal to 50 cents, find the Nash equilibrium of the soda market in this small town. Illusrate the Nash equilibrium by using the best repsonse functions of both companies. %3D
1. In class, we showed that in a Cournot duopoly with demand p: ab(91 +92) and marginal costs of c₁ for firm 1 and c2 for firm two, the firms' best response functions were as follows: a C1 92 2b 91 a-c2 92 - 2b 91 822 and (a) Find equilibrium expressions for q₁ and q in terms of a, b, C1, and C2 only. (b) Show that the equilibrium price will be p": = a + c1 + €2 3
Consider two firms that produce identical products in a situation of duopoly. The two firms have the same marginal cost. Which of the following statements is true: O Under Cournot competition, the equilibrium price is lower than the equilibrium price under Bertrand competition O Under Cournot competition, the equilibrium price will be at the same level as the equilibrium price under perfect competition Under Cournot competition, the equilibrium price will be at the same level as the price under a monopoly O Under Bertrand competition, the equilibrium price will be at the same level as the equilibrium price under perfect competition O The two firms will end up producing different levels of output
Consider a homogenous product duopoly in which the two firms, 1 and 2, compete by choosing their respective quantities, Q1 and Q2. Market demand is given by Q=20−P, where P is the market price and Q= Q1+Q2. Firm 2’s total costs are given by TC2 = 2Q2 , while firm 1’s total costs areTC1= Q1^2 . (a) calculate To which firm would the ability to move first be most valuable? Explain fully. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.