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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Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.
0:29:15 Suppose that the market demand for a certain product is given by P = 670 – Q. where Qis total industry output. There are only three firms F, F,, F, that manufacture that product. The three firms have the following marginal costs: c = 32, c2 = 34 and C3 = 36. The leader (F) makes a production decision q1. F2, after observing the quantity chosen by F chooses its own quantity q2. Finally F3, after observing the quantities chosen by F, and F, chooses its own quantity q3. a) Determine the output levels that will be produced in a Stackelberg -Nash equilibrium 91 = 93 = b) Determine the price level in such an equilibrium P= c) Determine the profit levels in such an equilibrium U1 = uz=
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5. Two firms are competing in a Bertrand market. Each firm's residual demand and cost functions are q, = 125 – 4p,+P2 TC, = 2q, 92 = 150 – 3p, + 4p, TC, = 6q, %3D a. Find the profit-maximizing market price for each firm assuming no product differentiation. b. Find the profit-maximizing quantity for each firm assuming product differentiation.
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