. 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
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...
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![3. 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: MC Α
= 30 + 1.5Q₁. Firm B's marginal cost of production is as
follows: MCB 100+ 2.5QB. Assume that each firm knows
the other's cost of production.
=
a.
If the two firm's decide their output simultaneously, how
much output will each firm produce? What price will be
charged in the market for the good?
b. If the firm A's decides its output first and then B decides its
output 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7913b93-e09b-49f6-837c-94bd295b5848%2F77490660-870d-4143-a592-786de5318b14%2Fa81oh_processed.png&w=3840&q=75)
Transcribed Image Text:3. 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: MC Α
= 30 + 1.5Q₁. Firm B's marginal cost of production is as
follows: MCB 100+ 2.5QB. Assume that each firm knows
the other's cost of production.
=
a.
If the two firm's decide their output simultaneously, how
much output will each firm produce? What price will be
charged in the market for the good?
b. If the firm A's decides its output first and then B decides its
output 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.
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