) Two firms produce identical product and sell it in a market with demand given by P = 400-20. The firms' costs are and TC₁ = 40q1 and TC2=40q2.. a) Find both firms' BR functions. b) Find Cournot equilibrium outputs of each firm, market quantity and price, and firms' profits. c) Suppose the firms decide to collude: find how much they should produce in total, how much should be produced by each firm and what price they should charge? d) Find Stackelberg equilibrium if firm 1 chooses output first. e) Make three diagrams: (i) BR functions with the outcomes of parts (b)-(d); (ii) firm 1's residual demand, MR and outcome for Cournot; (iii) firm 1's residual D, MR and outcome for collusion. f) Find Bertrand equilibrium (market output and price and output produced by each firm).

) Two firms produce identical product and sell it in a market with demand given by P = 400-20. The firms' costs are and TC₁ = 40q1 and TC2=40q2.. a) Find both firms' BR functions. b) Find Cournot equilibrium outputs of each firm, market quantity and price, and firms' profits. c) Suppose the firms decide to collude: find how much they should produce in total, how much should be produced by each firm and what price they should charge? d) Find Stackelberg equilibrium if firm 1 chooses output first. e) Make three diagrams: (i) BR functions with the outcomes of parts (b)-(d); (ii) firm 1's residual demand, MR and outcome for Cournot; (iii) firm 1's residual D, MR and outcome for collusion. f) Find Bertrand equilibrium (market output and price and output produced by each firm).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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