All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities q4 and qB. Inverse demand is P(9A + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages n a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s* qB from the government.) You must show your work at each step, unless the questions is followed by "No work required."
All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities q4 and qB. Inverse demand is P(9A + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages n a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s* qB from the government.) You must show your work at each step, unless the questions is followed by "No work required."
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.6P
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3) Assume that s = 3.
(a) Find firm B’s profit function under the subsidy. (No work required.)
(b) Find firm B’s best response function.(You may do this directly or by setting s to zero in your
expressions from (1b).
(c) Why don’t I need to ask you to solve for A’s best response?
(d) Solve for the equilibrium outputs (q*A, q*b ).
(e) Solve for the
(f) Solve for firm B profits.
Can you please answer the last 3 questions
Transcribed Image Text:All question are with regards to the following set up. There are two firms A and B. Firms
compete in a Cournot Duopoly in Karhide. They set quantities qA and qB. Inverse demand is
P(9A + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm
(in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages
in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B
produces and sells q3 units, firm B receives a payment of s * qB from the government.)
You must show your work at each step, unless the questions is followed by "No work required."
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