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2. Nash Equilibrium in a Cournot Oligopoly a. Using the best response functions you calculated in the previous question, calculate how much each firm produces at the Nash Equilibrium for this game. b. Using the QA and Q you calculated in part a, calculate the market price. C. Does firm A or firm B produce more in this case? Does this result make sense to you? Why do you think this is (in words!)? EXPLAIN d. Use the profit functions you calculated earlier to calculate profits for both firms in this example? Which firm has higher profits? Why do you think this is? EXPLAIN

2. Nash Equilibrium in a Cournot Oligopoly a. Using the best response functions you calculated in the previous question, calculate how much each firm produces at the Nash Equilibrium for this game. b. Using the QA and Q you calculated in part a, calculate the market price. C. Does firm A or firm B produce more in this case? Does this result make sense to you? Why do you think this is (in words!)? EXPLAIN d. Use the profit functions you calculated earlier to calculate profits for both firms in this example? Which firm has higher profits? Why do you think this is? EXPLAIN

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Given - Answers for question #1 A-D

(A)πA=780QA−145(QA+QB)QA−400QAπA=780QA-145QA+QBQA-400QA  is the firm profit function of firm A .

(B)QA=8550−QB2QA=8550-QB2is the best response function of firm A

(C)πB=780QB−145(QA+QB)QB−260QBπB=780QB-145QA+QBQB-260QB  is the firm profit function of firm B .

(D)QB=11700−QA2QB=11700-QA2is the best response function of firm B

Please answer questions #2 A-D

A³ d. Using the profit function above and assuming that firm A produces QĄ, calculate what firm B's best response is to firm A's decision to produce QA- Note: Firm B's best response should be a function of QA 2. Nash Equilibrium in a Cournot Oligopoly a. Using the best response functions you calculated in the previous question, calculate how much each firm produces at the Nash Equilibrium for this game. b. Using the QA and QB you calculated in part a, calculate the market price. C. Does firm A or firm B produce more in this case? Does this result make sense to you? Why do you think this is (in words!)? EXPLAIN d. Use the profit functions you calculated earlier to calculate profits for both firms in this example? Which firm has higher profits? Why do you think this is? EXPLAIN
Transcribed Image Text:A³ d. Using the profit function above and assuming that firm A produces QĄ, calculate what firm B's best response is to firm A's decision to produce QA- Note: Firm B's best response should be a function of QA 2. Nash Equilibrium in a Cournot Oligopoly a. Using the best response functions you calculated in the previous question, calculate how much each firm produces at the Nash Equilibrium for this game. b. Using the QA and QB you calculated in part a, calculate the market price. C. Does firm A or firm B produce more in this case? Does this result make sense to you? Why do you think this is (in words!)? EXPLAIN d. Use the profit functions you calculated earlier to calculate profits for both firms in this example? Which firm has higher profits? Why do you think this is? EXPLAIN
1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore Q(P) = 35, 100 - 45P P(QM) = 780 - Q = 780 -0.02222QM 1 45 QM is total market production (i.e., combined production of firm's A and B. That is: P(QA, QB) = 780- As a result, the inverse demand curve for each firm is: 1 LA 2M = A +QB -QB = 780 -0.02222QA -0.02222QB 45 45 Unlike the example in class, the two firms have different costs. TCA (QA) = 4000A TCB (QB) = 260QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces QB, calculate what firm A's best response is to firm B's decision to produce QB- Note: Firm A's best response should be a function of c. Using the demand function and the cost functions above, what is firm B's profit function
Transcribed Image Text:1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore Q(P) = 35, 100 - 45P P(QM) = 780 - Q = 780 -0.02222QM 1 45 QM is total market production (i.e., combined production of firm's A and B. That is: P(QA, QB) = 780- As a result, the inverse demand curve for each firm is: 1 LA 2M = A +QB -QB = 780 -0.02222QA -0.02222QB 45 45 Unlike the example in class, the two firms have different costs. TCA (QA) = 4000A TCB (QB) = 260QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces QB, calculate what firm A's best response is to firm B's decision to produce QB- Note: Firm A's best response should be a function of c. Using the demand function and the cost functions above, what is firm B's profit function
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