(3) Assume that s = 3. (a) Find firm B's profit function under the subsidy. (No work required.) (b) Find firm B's best response function. (You may do this directly or by setting s to zero in your expressions from (1b). (c) Why don't I need to ask you to solve for A's best response?

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Chapter1: Making Economics Decisions
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just q3 A B and C please thank you

All question are with regards to the following set up. There are two firms A and B. Firms
compete in a Cournot Duopoly in Karhide. They set quantities A and qB. Inverse demand is
P(qA + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm
(in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages
in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B
produces and sells q units, firm B receives a payment of s *qg from the government.)
You must show your
work at each step, unless the questions is followed by "No work required."
Transcribed Image Text:All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities A and qB. Inverse demand is P(qA + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells q units, firm B receives a payment of s *qg from the government.) You must show your work at each step, unless the questions is followed by "No work required."
(3)
Assume that s = 3.
(a) Find firm B's profit function under the subsidy. (No work required.)
(b) Find firm B's best response function. (You may do this directly or by setting s to zero in your
expressions from (1b).
(c) Why don't I need to ask you to solve for A's best response?
(d) Solve for the equilibrium outputs (9A, 96).
(e) Solve for the equilibrium price.
(f) Solve for firm B profits.
Transcribed Image Text:(3) Assume that s = 3. (a) Find firm B's profit function under the subsidy. (No work required.) (b) Find firm B's best response function. (You may do this directly or by setting s to zero in your expressions from (1b). (c) Why don't I need to ask you to solve for A's best response? (d) Solve for the equilibrium outputs (9A, 96). (e) Solve for the equilibrium price. (f) Solve for firm B profits.
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