1. Suppose there are 2 firms {A,B} producing the same homogeneous good with constant marginal costs cB = cA. What is the Bertrand equilibrium? Suppose cB
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A: Given, c(x) = 10x2Demand function, x(p) = 100 - 0.1p
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- 5. Suppose there are two firms in a Cournot type setting (choosing quantity simultaneously). How would an increase in the marginal cost of firm 1 change the equilibrium output of firm 1 and firm 2? Depict your answer graphically.Suppose that the market consists of 6 identical firms , that the market demand curve is P=200-2Q and that each firm's marginal cost is 32. The cournot equilibrium quantity per firm is q=_____________________ and the equilibrium quantity in the market is Q=______________________. The market price is P=$______________ per unit.True or false: In a perfectly competetive market, when AVP<P<ATC, a firm will not produce any output to minimize its costs. Explain why using a graph.
- 3Question 3 The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has al cost of production of C₁= 15*Q₁ and firm 2 has a cost of production of C₂=20*Q₂. 1) Suppose firm 1 and firm 2 compute simultaneously in quantities. What are the Cournot quantities and prices? What are the profits of firm 1 and 2? 2) Suppose firm 1 and firm 2 compete simultaneously in prices. What are the Bertrand quantities and prices? What are the profits of firm 1 and 2? 3) Suppose that firm play a Stackelberg game. First firm 1 sets the quantity in t=1, then, knowing which quantity firm 1 has set, firm 2 chooses the quantity in t=2. What are the Stackelberg quantities and prices? What are the profits od firm 1 and 2? Compared to part a) which firm benefits and which firm loses?The tables (below) show the willingness to pay by three (competitive) consumers for additional units of some good, and the marginal costs of three (competitive) firms that produce that good. a) Compute the competitive equilibrium quantity and price for this market. Also, compute each consumer's surplus and each firm's profits. b) Now suppose that you have access to the same technology (and competitive input markets) as that of Firm 3. Entering the market (that is, launching a fourth firm) means a fixed (yes, sunk too) cost of $10. Would you decide to enter? (Entry has effects on the market, of course.) c) With the same data, suppose that all three firms merge. That is, now a single corporation controls (and decides on output for) all three firms (now, plants of one single firm). Obtain the output (or, equivalently, the price) that this monopolistic corporation will choose, and evaluate the consequences for the consumers (that is, the effect on the consumer surplus) and for the profits…
- 1 Consider two identical firms with a unit cost of production of $10 and a market demand of p= 60-y. (a) What is firm 1’s optimal output level as a function of firm 2’s output? (b) What is firm 2’s optimal output level as a function of firm 1’s output? (c) What is the Cournot equilibrium output level for these firms? (d) What is the Cournot equilibrium price level? Show your work step by step.Consider the Bertrand competition setup with 2 firms producing identical goods. The market demandis given by Q = 100 − P. T C1 = 30q1 and T C2 = 70q2. Derive the Bertrand equilibrium (prices andquantities of both firms) here.Homework (Ch 14) 1. There must be many buyers and sellers-a few players can't dominate the market. 2. Firms must produce an identical product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for th problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed. Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store.…