Answered: A duopoly faces an inverse market…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A duopoly faces an inverse market demand of P(Q) = 240−Q.
Firm 1 has a constant marginal cost of MC₁ (q₁) = $10.
Firm 2's constant marginal cost is MC₂ (q₂) = $20.
Assume fixed costs are negligible for both firms. Calculate the output of each firm, market output, and price if there is (A) a collusive equilibrium or (B) a Cournot equilibrium.

(A) Collusive equilibrium (Enter your responses rounded to two decimal places)

The collusive equilibrium occurs where q₁ equals ?
and q₂equals ?

Market output is ?

The collusive equilibrium price is ?

(B) Cournot equilibrium (Enter your responses using rounded to two decimal places)

The Nash-Cournot equilibrium occurs where q₁ equals ?

and q₂ equals ?

Market output is ?

The equilibrium occurs at a price of ?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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