ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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D, E and F please thank you

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 A and q. 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 qв units, firm B receives a payment of s* qg from the government.) You must show your work at each step, unless the questions is followed by "No work required."
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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 A and q. 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 qв units, firm B receives a payment of s* qg from the government.) You must show your work at each step, unless the questions is followed by "No work required."
(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 (9₁, 96). (e) Solve for the equilibrium price. (f) Solve for firm B profits.
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Transcribed Image Text:(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 (9₁, 96). (e) Solve for the equilibrium price. (f) Solve for firm B profits.
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