7. Jie is a firm manager deciding its sales quantity strategy. His firm is in a market with another competitor, and he is the leader in the sequential game. Collusion is impossible. The market inverse demand function is P = 16 – Q, where Q is the total quantity of q? the production. The cost functions of Jie's firm and the other firm are c(q) = and c(q) = q?, respectively. So Jie should set the quantity as

7. Jie is a firm manager deciding its sales quantity strategy. His firm is in a market with another competitor, and he is the leader in the sequential game. Collusion is impossible. The market inverse demand function is P = 16 – Q, where Q is the total quantity of q? the production. The cost functions of Jie's firm and the other firm are c(q) = and c(q) = q?, respectively. So Jie should set the quantity as

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Economics: Industrial Economics Question: In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = A - B Q. The cost structure of firm 1 is given by C1(q1) = F1 + c1 q1 and that of firm 2 is given by C2(q2) = F2 + c2 q2. Prior to competing, the two firms can engage in research at levels (x1, x2) respectively in order to lower their marginal costs. As a result, marginal costs are c1 = c - x1 - β2x2 and c2= C - x2 - β1 X1. where β1 = β2 > ½. Finally, the research costs are F1 = a1 (x1)^2 /2 and F2 = a2 (x2)^2 /2, where a1 > 0 and a2> 0. 1. The Nash Equilibrium research levels are Choices: A. Higher than the cooperative research levels for both firms. B. Higher than cooperative research levels for firm 1 but lower for... C. Lower than the cooperative research levels for both firms. D. Higher than cooperative research levels for firm 2 but lower for... 2. An increase in the value of a2 would Choices: A.…
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Answer 4 and 4
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