1. there are two companies (company 1 and company 2) that operate in a market where both firms produce a homogenous item. The two companies sell the item in a market where the demand function is given by: Q = 22 – 0.50P. Now if Q < 22, Q = 0, if Q > 22 where Q = q1 + q2 is the total market output and qa is company a's output, a = 1,2. company s's cost function is: Ca (qa)= 4qa . Explain the two firms' Bertrand equilibrium price and quantity. To enhance your explanation, use response function diagrams. i) ii) Assume the two companies can now collaborate and act as a single monopoly firm. Calculate the equilibrium quantities that each firm sells, the profits that each firm makes, and the market price that each firm pays. How much has deadweight loss increased as a result of the collusion between the two companies? iii)

1. there are two companies (company 1 and company 2) that operate in a market where both firms produce a homogenous item. The two companies sell the item in a market where the demand function is given by: Q = 22 – 0.50P. Now if Q < 22, Q = 0, if Q > 22 where Q = q1 + q2 is the total market output and qa is company a's output, a = 1,2. company s's cost function is: Ca (qa)= 4qa . Explain the two firms' Bertrand equilibrium price and quantity. To enhance your explanation, use response function diagrams. i) ii) Assume the two companies can now collaborate and act as a single monopoly firm. Calculate the equilibrium quantities that each firm sells, the profits that each firm makes, and the market price that each firm pays. How much has deadweight loss increased as a result of the collusion between the two companies? iii)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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