3. Suppose there are only two firms in an industry selling anidentical product where the quantity produced must be setwell in advance of the good being sold in the market (and thusthe quantity cannot be changed rapidly). The market demandfor this good is given by the following equation: Q = 1,000 -4P. Firm A's marginal cost of production is as follows: MC Α= 30 + 1.5Q₁. Firm B's marginal cost of production is asfollows: MCB 100+ 2.5QB. Assume that each firm knowsthe other's cost of production.=a.If the two firm's decide their output simultaneously, howmuch output will each firm produce? What price will becharged in the market for the good?b. If the firm A's decides its output first and then B decides itsoutput second, how much output will each firm produce?What price will be charged in the market for the good?Does A have an advantage by setting output first? Explain.

Firm competes on the basis of output in the Cournot model. While in the Stackelberg model, the one…

. Suppose there are only two firms in an industry selling an identical product where the quantity produced must be set well in advance of the good being sold in the market (and thus the quantity cannot be changed rapidly). The market demand for this good is given by the following equation: Q = 1,000 - 4P. Firm A's marginal cost of production is as follows: MCA = = 30 + 1.5Q₁. Firm B's marginal cost of production is as follows: MCB 100+ 2.5Qg. Assume that each firm knows the other's cost of production. a. If the two firm's decide their output simultaneously, how

. Suppose there are only two firms in an industry selling an identical product where the quantity produced must be set well in advance of the good being sold in the market (and thus the quantity cannot be changed rapidly). The market demand for this good is given by the following equation: Q = 1,000 - 4P. Firm A's marginal cost of production is as follows: MCA = = 30 + 1.5Q₁. Firm B's marginal cost of production is as follows: MCB 100+ 2.5Qg. Assume that each firm knows the other's cost of production. a. If the two firm's decide their output simultaneously, how

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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