3) Assuming that firms compete a la Cournot,that all firms have the same marginal cost, andthat demand is linear, when is price mostsensitive to changes in marginal cost: in amarketwith very few firms or in a market with manyfirms? Show this formally. [Hint: assumedemand p = a - bQ]Bertrand duopoly withb)differentiated products. Demand curves areConsideragiven by|p! = 600 – 2q! "p" = 600 – q! - 2q"Suppose that the cost functions are given by(q#) = 60q# , for i = 1, 2. Find the equilibriumoutputs, the prices and the profits.

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Answered: 3) Assuming that firms compete a la…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Assume that private schools form a competitive industry. Suppose the demand for private schools rises because the government initiates a new program to offer income tax rebates to parents with children in private schools. In the short run, what happens to the number of students in private schools? What happens to the profits of each school? Answer by making two clearly labeled graphs (industry and firm-level) with clear explanations.
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.…
2. In the competitive mink oil industry, each fim has the same cost function: C = 10,000 100 + 0.01q. Demand for mink oil is as follows: Q = p2 What will be the long-run equilibrium price and quantity in the market? How many fims are in the industıy?
3 In a Cournot market with two firms, the inverse market demand curve is P=50-2Q, where Q=q1+q2(Firm 1’s output is ; Firm 2’s output is ). Both firms have a constant marginal cost of 14. If Firm 2 produces 12 units of output, how much should Firm 1 produce? Group of answer choices 3 6 0 12
Question 3 Suppose that the cost function of a firm is C(q)=4q. Suppose that this is the only firm in the market, and demand is Q(p)=10-p. What is the amount of the good produced in a competitive equilibrium in this economy? 7 4 6 3 5
Proper answer please
2.- Each of two firms, firms 1 and 2, has a cost function C(q) = 1 2 q; the demand function for the firms' output is Q = 1.5-p, where Q is the total output. Firms compete in prices. That is, firms choose simultaneously what price they charge. Consumers will buy from the firm offering the lowest price. In case of tying, firms split equally the demand at the (common) price. The firm that charges the higher price sells nothing. (Bertrand model.) (a) Formally argue that there could be no equilibrium in prices other than p1 = p2 = 1 2. (b) Solve the same problem, but this time assuming that firms compete in quantities.Now, suppose that firm 1 has a capacity constraint of 1/3. That is, no matter what demand it gets, it can serve at most 1/3 units. Suppose that these units are served to the consumers who are willing to pay the most. Thus, even if it sets a price above that of firm 1, firm 2 may be able to sell some output. (c) Obtain the (residual) demand of firm 2 (as a function of its own…

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3) Assuming that firms compete a la Cournot, that all firms have the same marginal cost, and that demand is linear, when is price most sensitive to changes in marginal cost: in a market with very few firms or in a market with many firms? Show this formally. [Hint: assume demand p = a – bQ]