3) Suppose there are two firms 1 and 2 producing a homogeneous product. The market demand function is 12-p%-DQ where Q is the marketdemand. There is price competition between firm 1 and 2. The cost function of firm 1 is c(q1) = q . The cost function of firm 2 is c(q2) = 2q;. There isdecreasing returns to scale. The consumers buy from the firm charging the lowest price. If the price of both the firms is same then the demand is equallyshared. The firms have to supply the amount demanded at the price set by firms. Find the set of pure strategy Nash equilibrium.%3DEach price in the range p E [4, 7.2] is a pure strategy Nash equilibrium.Each price in the range p E [6, 7.2] is a pure strategy Nash equilibrium.Each price in the range p E [6, 9] is a pure strategy Nash equilibrium.Each price in the range p E [4, 6] is a pure strategy Nash equilibrium.

Market Demand : Q = 12 - p => p = 12 - Q Where , Q = q1 + q2 Cost function of firm 1 = q12 Cost…

Answered: 3) Suppose there are two firms 1 and 2…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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Suppose that the market demand for a product is given by Q= A-P (A> 0). Suppose also that in a competitive industry the typical firm's cost function is given by C(g) = a- (а > 0). 2 (a) Calculate the long-run equilibrium market price P and the output for the typical firm q. (b) Calculate the equilibrium number of firms in the market. (c) Derive, and determine the sign of, dn/dA and dn/da. Explain the signs intuitively.
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a) Find the long run equilibrium price. Find the minimum efficient scale of the typical firm. Find the typical firm’s average cost when it operates at minimum efficient scale. In the long run, what price will prevail in this market? In words, clearly justify your answer. Suppose demand is QD = 3,200 – 100P. (b) Explain why you expect the number of firms in this market to be fifty-five. In this market, what is the short run supply function of the typical firm? What is the short run market supply function? Suppose the local government introduced a $90 licensing fee that raised the fixed cost from $160 to $250. c) Would the introduction of the licensing fee affect the short run equilibrium price or quantity? Justify your answer? Clearly explain why you expect that in the long run fewer larger firms will operate in this market. After the introduction of the licensing fee, what is the new long run equilibrium price? How many firms will survive in this market?
Suppose that the manager of a firm operating in a competitive market has estimated the firm's average variable costs function to be AVC = 10 – 0.03q + 0.00005q? TC = 600 + 10q – 0.03q² + 0.00005q³ The MC curve in this setting is МC %3D 10 — 0.06q + 0.00015q? Suppose the market price for output is $10 per unit. What is the profit maximizing level of output? (Start q at 0, but increase it by 50 each step. Get q at least past 600. Also, be sure to pass though every step of the maximization flow chart to answer all questions.) What is the profit per unit of output? What is the total profit of this firm? Suppose the price drops to $7 per unit what is the profit maximizing level of output? (This is not a nice round number. So, look closely.) What is the profit per unit of output? What is the firms total profit? Should the firm continue to operate?
All ims in a competitive industry have identical cost functions c(y)=y2+25 for y>0 and c(0) = 0. The demand function for this industry is given by D(p) = 90-p. 1. If this industry is served by 8 firms in the short run, the equilibrium price in the short run will be: 2. If the market price is p= 18, each firm will supply an output of 3. If the market price is p = 18, each firm will earn a profit of %3D 4. In the long run, firms are free to enter and exit the market. The equilibrium price in the long run will be 5. In long-run industry equilibrium, each firm will supply an output of 6. In long-run industry equilibrium, the number of firms in the industry will be:
The inverse demand for shampoo is P = 30 – 0.03Q, where P is the price per bottle in dollars and Q is the number of bottles brought to market in hundreds. There are two manufacturers in the local market. Shop 1's marginal cost function is MC1 = 0.10q1, where q1 is the number of bottles it brings to market. Shop 2's marginal cost function is MC2 = 0.10q2, where q2 is the number of bottles it brings to market. The two firms are Cournot competitors that set output so that Q = q1 + q2. In equilibrium, the market quantity is _____
Could I have help. I’m not understanding how to find the mc’s
teach this
A perfectly competitive industry is in long-run equilibrium. Each of the identical firms has a long- run cost function C = 100 + q². As a result, a firm's marginal cost function is MC = 2q. In the long-run competitive equilibrium, (a) How much does the firm produce? (b) What is the equilibrium price? (c) If the market quantity demanded at the equilibrium price is Q = 2500, how many firms are in the market?
Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + 1/2q2 Marginal cost: MC = q where q is an individual firm's quantity produced. The market demand curve for this product is Demand: QD where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. = 120 – P а. What is each firm’s fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? с. Give the equation for each firm's supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. е. What is the equilibrium price and quantity for this market in the short run? In this equilibrium, how much does each firm produce? Calculate each firm's profit or ^ loss. Is there…
Question 3 Suppose a market demand function is given by QD(P) = 1,000 - 10P. The product can be produced with a cost function C(Q) = 10,000 + 20Q. (a) Determine Q and P and the firm's profit if there is a single firm. (b) Determine total output Q, the equilibrium price, and the profit of each firm if there are two firms (i.e., a Cournot oligopoly). (c) Determine Q. the equilibrium price, and the profit of each firm if there are 10 firms.

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