Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P=190 −2 (Q₁ + Q2). They estimate costs to be C₁(Q₁) = 16Q₁ and C₂(Q2) = 28Q2. a. Determine the reaction function for each firm. Firm 1: Q₁ = Firm 2: Q2 b. Calculate each firm's equilibrium output. Firm 1: Firm 2: Q2 c. Calculate the equilibrium market price. $ d. Calculate the profit each firm earns in equilibrium. Firm 1: $ Firm 2: $
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- Suppose that there are two firms in an industry and they face market demand y=400-0.5p where y=y1+y2 . The total cost functions of the firms are C1(y1)= 40y1 and C2(y2)= 2y22. a) Assume initially that the firms enter into Cournot competition. Calculate the equilibrium market price and each firm’s equilibrium output. That is, find y1c, y2sand pc.b) Calculate the equilibrium market price and each firm’s equilibrium output assuming that firm 2 is the Stackelberg leader and firm 1 is the follower. That is, find y1s, y2sand ps.The inverse market demand curve for salmon is given by P(Y) = 100 – 2Y, and the total cost function for any firm in the industry is given by TC(y) = 4y. a. Suppose that two Cournot firms operated in the market. What would be the reaction function for Firm 1 and the reaction function of Firm 2? (Notes: The marginal cost is not zero). If the firms were operating at the Cournot equilibrium point, what would the industry output and price be? b. For the Cournot case, draw the two reaction curves and indicate the equilibrium point on the graphA) Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 90 – 3Q. The marginal cost for each firm is €18. Calculate the level of output that each firm would produce at the Cournot equilibrium. B) Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60 – Q. The marginal cost for each firm is €36. What price should Firm 1 charge at the Cournot equilibrium? C) Consider the production function Q = 10KL. Will the MRTS for this production function remain constant along the Q = 200 isoquant? Explain briefly.
- 1. marginal costs e, = c, = c, = 20. The inverse demand function is given by P = 100 - Q. where Q = q, + 4: + 93- Consider a market with three firms (i - 1, 2, 3). which have identical a) Identify the reaction functions for each firm and compute the Cournot equilibrium, i.e., the market price and quantity. b) What happens to the market price if all three firms merge compared to part (a)?a) Suppose that the two firms engage in Cournot competition. Find the equilibrium price PNE in the industry, the equilibrium outputs QANE and QBNE, as well as the profits πANE and πBNE, for each firm. b) Suppose the marginal cost for firm B increases from $20 to $140, while everything else remains unchanged. Find the new equilibrium price PNE in the industry, the new equilibrium outputs QANE and QBNE, as well as the new profits πANE and πBNE for each firm. c) Suppose that, in addition to the marginal cost increase from $20 to $140 from sub question b), firm B also has a fixed cost of $2500, out of which $2100 may be recouped if it shuts down; everything else remains unchanged. In this case, what will firm B’s optimal output be? (Justify your answer.) What will firm A’s profit be?2) Assume that there are 2 firms producing an identical product. Both firms have the same total cost function TC(q) =q2. The inverse demand function for the firms' output is p=120 Q, where Q is the total output and p is price. 1. What are the equilibrium price, output and profits of each firm if they are competing with each other? (Hint: Consider the equilibrium in a Cournot game.) 2. What happens if they form a cartel? Calculate the equilibrium price, output, and profits for the cartel? 3. If a single firm cheated, what would its output and profits be, assuming the other firm maintains the cartel price? Calculate the new outputs and profits for bath firms: 4. Discuss why it is hard to enforce a cartel. Explain using words. DO NOT do any calculations. DO NOT draw any graphs. 5. What can the cartel members do to enforce the cartel agreement? Propose a method. Describe the method using words. DO NOT do any calculations. DO NOT draw any graphs.
- Q1: What is the price-equillibrium under the assumption of the two companies colluding? What is the profit for each firm? Q2: Derive the output reaction curves for both firms and calculate the price-output equllibrium under this assumption. What is the profit for each firm?The inverse market demand eurve for a Covid-19 mask is given by P(y) = 120 – 2y , and the total cost function for any firm in the industry is given by TC(y) = 4y • What will be the total output and price if there are two Cournot firms competing in the industry? • What would be the total output and price if two firms have decided to collude?The inverse demand for a homogenerous-product STakelberg duopoly is P=18,000-5Q. The cost structures for the leader and the follower, respectively, are CL(QL=2,000QLand CF(QF)=4000Qf. What is the follower's reaction function? Determine equilibrium output level for both leader and follower. Determine the equilibrium market price. Determin the profits of the leader and the follower. Please answer correct please asap please Don't answer by pen paper plz
- Suppose that Raleigh and Dawes are the only sellers of bicycles in the UK. The inverse market demand function for bicycles is ?(?)=200−2?. Both firms have the same total cost function: ??(?)=12? and the same marginal cost: ??(?)=12.Suppose this market is a Stackelberg oligopoly and Raleigh is the first mover.a) Write down a formula for the reaction function of Dawes.b) Calculate the equilibrium quantity that each firm produces and the equilibrium price in the market.c) At the Stackelberg equilibrium, how much profit does each firm make?Suppose now that the two firms decide to act like a single monopolist.a) What will the total quantity of bicycles sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium.b) Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly.c) For the…Consider an industry with two firms, each of which has a constant marginal cost of 20. The inverse demand facing this industry is P(Y) = 220 −Y, where Y = y1 + y2 is the total output. 1. What is the competitive level of output? (Recall: price equals marginal cost at the competitive equilibrium.) 2. What is the output of each firm in the Cournot equilibrium? 3. What is the output of each firm in the Stackelberg equilibrium when firm 1 is the follower and firm 2 is the leader?1. Economies of scale Web Slinger is an Internet service provider. In the long run, Web Slinger can provide Internet service for 20,000 homes each month at a total cost of $600,000, Internet service for 30,000 homes at a total cost of $750,000, or Internet service for 40,000 homes at a total cost of $800,000. Use the purple points (diamond symbol) on this graph to plot points of the long-run average cost curve at outputs of 20,000, 30,000, and 40,000 homes. (? 50 Average cost 40 30 20 10 10 20 30 40 50 HOMES SERVED (Thousands) AVERAGE COST (Dollars per home per month)