Now consider the same industry but assume that two firms with the same costfunction*c(qi) = 2 × qi for i = {1,2}are active in this market.What is the price that realizes when they set prices in a simultanous move game (iethey play Bertrand).0.50firm is insteadAssume now that the cost of the secondc(92) = 5* 92What is the equilibrium price if they again play Bertrand? (round to the nearestwhole number)1 A different industry has a Demand curve given byQ = 800p-2Assume that a monopolist supplies this industry. The cost function of thismonopolist is c(Q)=2*Q.What is the price the monopolist charges?00What is the quantity the monopolist sells?

Answered: Image /qna-images/answer/fafa9523-f176-428c-9560-875672087b5d.jpg

Answered: Now consider the same industry but…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An industry has a demand function of QP(p) = 500 – 250p. Suppose now that each firm has a constant marginal cost equal to 1. a. If there are n identical firms, what would be the profit of each under Cournot competition? 5. What would be the profit of each if they collude? c. If the firms face that demand function each period, what discount factor is required to support collusion? d. What happens to the required discount factor as n grows?
Archer Daniels Midland (ADM) and Cargill are the biggest makers of high-fructose corn syrup (HFCS), used to sweeten Coke, Pepsi, and other non-diet soft drinks. Each firm is currently choosing between increasing or decreasing their price for HFCS. The table below gives each firm's profits in each possible situation. A is Archer Daniels Midland and C is Cargill. For purposes of this question, ignore the existence of other HFCS makers. Cargill P increase P decrease P increase A: $500 million A: $200 million C: $400 million C: $500 million ADM P decrease A: $600 million A: $350 million C: $200 million C: $300 million a. Assuming the two firms do not cooperate, does either have a dominant strategy? If so, what is it? b. If ADM and Cargill decide to cooperate, how, if at all, will the outcome differ from part a? Would this case be an evample of a repeated or a pon-reneated game?
* Suppose there are two identical firms in an industry who compete by setting quantities. The output of firm 1 is denoted by q, and that of firm 2 is denoted by q Each firm faces a constant marginal cost of 3. Let Q denote total output. Le Q-q+42 The inverse demand curve in the market is given by (a) Find the Cournot-Nash equilibrium quantity produced by each firm and the market price. (b) If the firms could collude, what would be the total output in the mar ket? Assuming each firm produces half of the collusive output, what is the profit of each firm? (c) Suppose each firm produces half of the collusive output identified in part (b). Firm 1 considers a deviation from this arrangement. What would be the best deviating output of firm 1 and its deviation profit? (d) Suppose firms interact repeatedly over an infinite horizon, and firms have a common discount factor & € (0,1) Specify a trigger strategy for each firm to sustain the collusive arrangement as an equilibrium outcome Cal- culate…
Consider an industry comprised of three identical firms faced with a linear cost function given by: C(qi) = cqi; for i = 1; 2; 3. Let inverse market demand be given by: P(Q) = a - bQ; where Q = q1 + q2 + q3.a. Compute the Cournot equilibrium; that is, find prices, quantities, and profits.b. Suppose that firms 1 and 2 merge, converting the market into a duopoly consisting of the “superfirm” and firm 3. Compute the new Cournot equilibrium. Once again find prices, quantities, and profits.c. Suppose that all three firms merge. Compute quantities, prices, and profits for the cartel solution.d. Suppose that firm 1 and 2 represent two members of OPEC – Saudi Arabia and Venezuela, say – while firm 3 is a non-OPEC oil exporting country – Russia, say. Describe the dynamics of OPEC. (Hint: re-interpret the solution to part 2, as 1 firm deviating from the fully cartelized solution. Is it convenient to have a partial cartel?)
Consider a duopoly market with 2 firms. Aggregate demand in this market is given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B. Assume the firms compete a la Cournot. 1. What are the equilibrium quantities? 2. What is the total quantity supplied on this market? 3. What is the equilibrium price in this market?
Consider a Cournot Duopoly model. The inverse demand for their products is given byP = 200 − 6Q, where Q is the total quantity supplied in the market (that is, Q = Q1 + Q2). Each firm has an identical cost function, given byT Ci = 2Qi, for i = 1, 2.(a) In the Cournot model, what does each firm choose?(b) What is the timing of each firm’s decision?(c) Find the Nash equilibrium quantities (Q∗1, Q∗2)?(d) What is the equilibrium price? Just help with c and d here please
Suppose that firms in a two-firm industry choose quantities every month, and each month the firms sell at the market-clearing price determined by the quantities they choose. Each firm has a constant marginal cost, and the market demand curve is linear of the form P = a - bQ, where Q is total industry quantity and P is the market price. Suppose that initially each firm has the same constant marginal cost. Further suppose that each month the firms attain the Cournot equilibrium in quantities. a) Suppose that it is observed that from one month to the next Firm 1’s quantity goes down, Firm 2’s quantity goes up, and the market price goes up. A change in the demand and/or cost conditions consistent with what we observe is: i) The market demand curve shifted leftward in a parallel fashion. ii) The market demand curve shifted rightward in a parallel fashion. iii) Firm 1’s marginal cost went up, while Firm 2’s marginal cost stayed the same. iv) Firm 2’s…
Consider Cournot competition with n identical firms. Suppose that the inverse demand function is linear with P(X) = a - bX, where X is total industry output, a; b > 0. Each firm has a linear cost function of the form C(x) = cx, where x stands for per firm output. It is assumed that a > c. a. At the symmetric equilibrium, what are the industry output and price levels? What are the equilibrium per firm output and profit levels? What is the equilibrium social welfare (defined as the difference between the area under the demand function and total cost)? b. Now let m out of n firms merge. Show that the merger is profitable for the m merged firms if and only if it involves a pre-merger market share of 80 percent. c. Show that each of the (n – m) non merged firms is better off after the merger. d. Show that the m-firm merger increases industry price and also lowers consumer welfare.
There are two firms competing in the market for Airplanes - Boeing (B) and Airbus (A). The market demand is given by Q = 120 - p. Their marginal cost are as follows: MCB = $20, MCA = $40. (Think of price being in millions.) How many airplanes did Boeing sell in this Airplane (please put your answer in numerical values with no comma or decimal place). How many airplanes did Airbus sell in this Airplane market? (please put your answer in numerical values with no comma or decimal place). What is the total quantities of airplanes sold in the market? (please put your market? answer in numerical values with no comma or decimal place) What is the equilibrium price in millions? million (please put your answer in numerical values with no dollar sign, comma or decimal place). What is Boeing's profit in millions? million (please put your answer in numerical values with no dollar sign, comma or decimal place). What million (please put your answer in numerical values with no dollar (please put is…
(Preferably answered digitally as I have a hard time understanding paper hand writing.)
Let ci be the constant marginal and average cost for firm i (so that firms may have different marginal costs). Suppose demand is given by P=1-Q. Calculate the Nash equilibrium quantities assuming there are two firms in a Cournot market. Also compute market output, market price, firm profits, industry prof- its, consumer surplus, and total welfare. Represent the Nash equilibrium on a best-response function diagram. Show how a reduction in firm 1’s cost would change the equilibrium. Draw a representative isoprofit for firm 1.
Consider the following game. Firm 1, the leader, selects an output ?1, after which firm 2, the follower, observes the choice of ?1 and then selects its own output ?2. The resulting price is one satisfying the industry demand curve ? = 200 − ?. Both firms have zero fixed costs and a constant marginal cost of 60. Determine the equilibrium output of each firm in the leader-follower game. What are firm 1’s profits in the equilibrium?

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