has a xed cost of $200 000. What will uns optimal decision be, and what will be the resulting market structure? Now assume that instead of having two firms in the market, we have a monopoly facing the in P(Q) = 400 - 100. The monopoly's marginal cost is $10. d) Find the price PM and the quantity QM that the monopoly will optimally choose. Find profit лM. e) Suppose that the monopoly described in (d) can first degree price discriminate. Find (c Monopoly's quantity, price, profit, the consumer surplus and the deadweight loss in thi representative graph here.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
C2) Consider an industry with only two firms: firm A and firm B. The industry's inverse demand is
P(Q) = 400 - ¹1/Q,
10
where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are
no fixed costs and no barriers to exit the market.
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 NEA and NEB for each firm.
marks]
b) Suppose the two firms engage in Stackelberg competition, with firm A moving first, and firm B
moving second. Find the equilibrium price PS in the industry, the equilibrium outputs QS and QBS, as
well as the profits π and TSB for each firm.
в
c) For this subquestion only, suppose that firm B has a fixed cost of $200 000: What will firm B's
optimal decision be, and what will be the resulting market structure?
Now assume that instead of having two firms in the market, we have a monopoly facing the inverse demand
P(Q): = 400-10Q. The monopoly's marginal cost is $10.
d) Find the price PM and the quantity QM that the monopoly will optimally choose. Find the monopoly
profit лM.
e) Suppose that the monopoly described in (d) can first degree price discriminate. Find (calculate) the
Monopoly's quantity, price, profit, the consumer surplus and the deadweight loss in this case. Draw a
representative graph here.
Transcribed Image Text:C2) Consider an industry with only two firms: firm A and firm B. The industry's inverse demand is P(Q) = 400 - ¹1/Q, 10 where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are no fixed costs and no barriers to exit the market. 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 NEA and NEB for each firm. marks] b) Suppose the two firms engage in Stackelberg competition, with firm A moving first, and firm B moving second. Find the equilibrium price PS in the industry, the equilibrium outputs QS and QBS, as well as the profits π and TSB for each firm. в c) For this subquestion only, suppose that firm B has a fixed cost of $200 000: What will firm B's optimal decision be, and what will be the resulting market structure? Now assume that instead of having two firms in the market, we have a monopoly facing the inverse demand P(Q): = 400-10Q. The monopoly's marginal cost is $10. d) Find the price PM and the quantity QM that the monopoly will optimally choose. Find the monopoly profit лM. e) Suppose that the monopoly described in (d) can first degree price discriminate. Find (calculate) the Monopoly's quantity, price, profit, the consumer surplus and the deadweight loss in this case. Draw a representative graph here.
Expert Solution
steps

Step by step

Solved in 3 steps with 5 images

Blurred answer
Knowledge Booster
Competitive Markets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education