Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and YummyFarms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output.Aggregate market output is Q = x + y.The (inverse) market demand schedule is:p = 176 - 2QBoth firms have identical cost structures:MC = MC₁ = ATC₂ = ATC₁ = $12Find Xtra Leafy's Cournot reaction function of the form:9x = a + bayWhere "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formattinginstructions above. If any value is negative, be sure to include its negative sign.a. a=b. b =Hint: One of your answers will be negative. Think about why.

A reaction function in the context of game theory and oligopoly competition like Cournot…

Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q=9x+qy. The (inverse) market demand schedule is: p = 176-2Q Both firms have identical cost structures: MC = MC₁ = ATC = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.

Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q=9x+qy. The (inverse) market demand schedule is: p = 176-2Q Both firms have identical cost structures: MC = MC₁ = ATC = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Suppose there are in total 3 firms in the market. Firm 1 decides its output first, then Firm 2 and Firm 3 decide their outputs simultaneously. The inverse demand function is p = 14 – 3q, where q = q1 + q2 + 43, and each firm's cost function is c(q.) = 2q?. What is the quantity that Firm 1 produces? Round your answer to 2 decimal points. Answer: The correct answer is: 1.04
In the gas industry, each firm chooses the output level to produce and price is determined by aggregate output. Market demand is given by p = 10-Q, with Q being the aggregate output. In the gas industry, there are two firms: GasA and GasB. Firms face the same total cost function: TC₁ = 4q₁, where i = {A, B}. a) Assuming that the firms simultaneously choose their output levels, compute firm-level output and profits in the market equilibrium, as well as the consumer surplus in equilibrium. b) Assume now that the two firms decide to merge. In this case, the merging process requires an administrative cost equal to 2, independently of the quantities the two firms produce after the merger. Moreover, the merger will reduce the marginal cost of the merged entity to 1, due to synergies. Firms split the profit of the merger equally. Compute firm-level output, profits and consumer surplus in the merger scenario. Do firms A and B have incentive to merge? If yes, should the Competition Commission…
The Canadian retail market for roasted whole coffee beans is dominated by two firms: Tim Hortons (T) and Kicking Horse (K). The market demand function is given by P(Q) = 64 – 0.5Q. Assume it is possible to produce partial units of output. • Kicking Horse's marginal cost for each kg of roasted coffee beans is $3. • Tim Horton's marginal cost for each kg of roasted coffee beans is $5 (although they've been around longer than Kicking Horse, they've only recently expanded their product line for consumers to brew their own coffee at home). What is the Cournot market equilibrium (P and Q)?
Consider two identical firms that face themarket demand p = 180 − q, where q = q_1 + q_2 is the total outputproduced by the two firms, and qi (i ∈ {1, 2}) is the output of firm i.The cost function of firm i is C_i(qi) = q_2i . Suppose, firm 1 chooses theprice p per unit of output first, and firm 2 will take the price p as givenand make its choice of output quantity q2.(a) Carefully write down Firm 2’s optimization problem and solve it.(b) Carefully write down Firm 1’s optimization problem and solve it.(c) What is the total output quantity produces by the two firms?Which profits will the firms make??
The Canadian retail market for roasted whole coffee beans is dominated by two firms: Tim Hortons (T) and Kicking Horse (K). The market demand function is given by P(Q)=64−0.5Q. Assume it is possible to produce partial units of output. Kicking Horse's marginal cost for each kg of roasted coffee beans is $3. Tim Horton's marginal cost for each kg of roasted coffee beans is $5 (although they've been around longer than Kicking Horse, they've only recently expanded their product line for consumers to brew their own coffee at home). What is the Cournot market equilibrium (P and Q)?
Suppose the inverse demand for a product produced by a single firm is given by: P = 64 – 4(Q) and this firm has a marginal cost of production of: MC = 8 1. If the firm cannot price-discriminate, what is the profit-maximizing price Number and level of output? Number 2. If the firm cannot price-discriminate, what is : -the consumer surplus Number , -the producer surplus Number -the dead-weight loss Number 3. If the firm can practice perfect price discrmination, what output level will it choose? Number -the consumer surplus Number -the producer surplus Number -the dead-weight loss Number. No hand written solution and no image
Alpha and Gamma are the only two phone handset manufacturers in the world. Each firm has a cost function given by: C(q) = cq + q?, where q is number of phones produced and c=70. The market demand for phones is represented by the inverse demand equation: P = a - bQ where Q = q1 + q2 is total output, a=250 and b=1. Suppose that each firm maximizes its profits taking its rival's output as given (i.e. the firms behave as Cournot oligopolists). a) What will be the equilibrium quantity selected by each firm? What is the market price? What is the profit level for each firm? Equilibrium quantity for each firm , price , profit b) It occurs to the managers of Alpha and Gamma that they could do a lot better by colluding. If the two firms were to collude, what would be the profit-maximizing choice of output for each firm? What is the industry price? What is the profit for each firm in this case? Equilibrium quantity for each firm , price , profit c) What minimum discount factor is required for…
Gamma and Zeta are the only two widget manufacturers in the world. Each firm has a cost function given by: C(q) = 10+20q + q^2, where q is number of widgets produced. The market demand for widgets is represented by the inverse demand equation: P = 200 - 2Q where Q = q1 + q2 is total output. Suppose that each firm maximizes its profits taking its rival's output as given (i.e. the firms behave as Cournot oligopolists). a) What will be the equilibrium quantity selected by each firm? What is the market price? What is the profit level for each firm? Equilibrium quantity for each firm__ price__ profit__ b) It occurs to the managers of Gamma and Zeta that they could do a lot better by colluding. If the two firms were to collude in a symmetric equilibrium, what would be the profit-maximizing choice of output for each firm? What is the industry price? What is the profit for each firm in this case? Equilibrium quantity for each firm__ price__ profit__ c) What minimum discount factor is required…
Firm A and Firm B are the only two firms in a market where price is determined by the inverse demand function: P = 147 - Q. Q is the sum of Firm A and Firm B's output, so Q = 9A + 9B Firm A's total cost function is given by TCA(9A) = 39A Firm B's total cost function is given by TCB(9B) = 89B If these firms Cournot compete (simultaneously setting quantities), what will market price be when both firms are maximizing profits in equilibrium? (Note: The answer may not be a whole number, so round to the nearest hundredth)
Q3: Q2: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -(1) - Firm B TC = 10 + 2Q - -(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Use the information given about firms A and B and appropriate diagrams/figures to explain how the equilibrium for both firms will change if a rival company increases its prices. Use the information given about firm A and appropriate diagrams/figures to explain how the equilibrium will change if it's cost of production falls by $1.
Consider a market with two identical firms, Firm A and Firm B. The market demand is: 1 P = 100 - where Q = Qa + QB - The cost conditions are MCA = MCg = ACĄ = ACg = 24. (Hint: Round your solutions to 2 decimal places.) a) Assume this market has a Stackelberg leader, Firm A. Solve for the quantity, price and profit for each firm. Explain your calculations. b) How does this compare to the Cournot-Nash equilibrium quantity, price and profit? Explain your calculations. c) Present the Stackelberg and Cournot equilibrium output using a diagram. d) Solve for the Bertrand equilibrium output, price and profit for each firm. Explain your calculations. Does the solution justify the Bertrand paradox? e) The crude oil market can be described as a Nash-Cournot market, in which Saudi Arabia acts as Stackelberg leader. Do you agree with this statement?
Consider a number of firms facing identical total cost function of the form: TC = Q3 -6Q2+10Q. The marginal cost associated with the cost function is: MC=3Q2 -12Q+10. A) Calculate the level of production that minimizes average variable cost. B) Calculate the shutdown price for each firm. C) Suppose market demand is given by Q=50-4P. Calculate the competitive equilibrium price and quantity for each firm. Assuming all firms are symmetric, how many exist in the long-run?