An industry contains two firms that have identical cost functions C(q)=10+2q. The inverse demand function for the market is P-50-2Q where Q is the total industry output. Assuming the firms compete in quantities: а. Find the firms' best response functions. Solve for the Cournot Nash Equilibrium of the game. What is the total industry output in equilibrium? What is the equilibrium price? b. с. If both firms could collude, what would the industry output and price be? Suppose they decide that each firm produces half of the industry output found in part (i). Is this agreement self-enforcing? Explain. ii. 2.

An industry contains two firms that have identical cost functions C(q)=10+2q. The inverse demand function for the market is P-50-2Q where Q is the total industry output. Assuming the firms compete in quantities: а. Find the firms' best response functions. Solve for the Cournot Nash Equilibrium of the game. What is the total industry output in equilibrium? What is the equilibrium price? b. с. If both firms could collude, what would the industry output and price be? Suppose they decide that each firm produces half of the industry output found in part (i). Is this agreement self-enforcing? Explain. ii. 2.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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