2. Consider an industry with two firms 1 and 2, each having marginal cost equal tozero. The industry demand isP(Y) = 60 – Y,where Y = y, + y2 is total output.a. What are the competitive equilibrium output and price of the market?b. Draw the demand schedule given output equals to 0, 10, 20, 30, 40, 50, 60, andindicate the corresponding profits. What are the monopolistic output and priceif there is only one firm? If there are two firms who collude with each other todecide their quantities, what are the output quantities of two firms?c. If the two firms decide their quantities independently and simultaneously, usegame theory to show if they have incentive to increase their quantities by 5units than the above level. If so, do they have incentive to increase theirquantities by 5 units further?

The form of market in which there are 2 firms that compete against each other is referred to as a…

Answered: 2. Consider an industry with two firms…

2. Consider an industry with two firms 1 and 2, each having marginal cost equal to zero. The industry demand is P(Y) = 60 – Y, where Y = y, +y, is total output.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 1.1P

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