3. Using the Cournot model, consider a market where demand for the good is given by the equation, P = 16 - Q. Assume that marginal cost is constant at 4. There are two, equal-sized firms whose outputs are 9₁ and 92, and there is no further entry. Total market output is q₁ + 92 = Q. Marginal revenue for each of the identical firms is given by MR₁ = 16-2q₁1 - 92 and MR₂ = 16-292 - 91. a. What is the best-response function for each firm? b. What is each firm's output? c. What is the market price? 91 = 92 = P=

3. Using the Cournot model, consider a market where demand for the good is given by the equation, P = 16 - Q. Assume that marginal cost is constant at 4. There are two, equal-sized firms whose outputs are 9₁ and 92, and there is no further entry. Total market output is q₁ + 92 = Q. Marginal revenue for each of the identical firms is given by MR₁ = 16-2q₁1 - 92 and MR₂ = 16-292 - 91. a. What is the best-response function for each firm? b. What is each firm's output? c. What is the market price? 91 = 92 = P=

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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