Im a bit confused on how start solving could I have some help A homogenous product is produced by two rival firms. The firms have the same costs.The demand faced by Firm 1 is:Q1 = 40 – P1 + ½P2The demand faced by Firm 2 is:Q2 = 40 – P2 + ½P1The firms' total cost equations are:TC1 =50Q1TC2 = 50Q2a. Show that if the firms collude to maximize joint profits, setting P1 = P2, then the outcomewill be the monopoly solution. Each firm's output and profit will be half of the amountsfound in question la.Qi* = Q2*%3Dp* =TR1 = TR2 =Ni = N2 =b. Suppose Firm 1 cheats on the collusive agreement. Firm 2 sets the price to which the firmsagreed in part A; Firm 1 takes Firm 2's price as given, and maximizes its own profits subjectto that assumption. Find the resulting prices and outputs.Q1* =P1* =P2* =14 C. Find the two firms' revenues, costs, and profits when Firm 1 cheats.TR1 =TC =TR2 =TC2 =12 =Vind. Use your answers above to complete the payoff matrix.FIRM 2 COLLUDESFIRM 2 DEFECTSFIRM 2 →P2 =P2 =FIRM 1 ĮFIRM 1 COLLUDESNi =P1 =N2 =FIRM 1 DEFECTSP1 =N2 =N2 =e. What is the Nash equilibrium (noncooperative) solution?P2 =P1 =15

Given information Demand functionQ1 =40-P1+0.5P2 Q2=40-P2+0.5P1 TC1=50Q1 TC2=50Q2

A homogenous product is produced by two rival firms. The firms have the same costs. The demand faced by Firm 1 is: Q1 = 40 – P1 + ½P2 %3D The demand faced by Firm 2 is: Q2 = 40 – P2 + 2P1 The firms' total cost equations are: TC1 = 50Q1 TC2 = 50Q2 a. Show that if the firms collude to maximize joint profits, setting P1 = P2, then the outcome will be the monopoly solution. Each firm's output and profit will be half of the amounts found in question la. %3D

A homogenous product is produced by two rival firms. The firms have the same costs. The demand faced by Firm 1 is: Q1 = 40 – P1 + ½P2 %3D The demand faced by Firm 2 is: Q2 = 40 – P2 + 2P1 The firms' total cost equations are: TC1 = 50Q1 TC2 = 50Q2 a. Show that if the firms collude to maximize joint profits, setting P1 = P2, then the outcome will be the monopoly solution. Each firm's output and profit will be half of the amounts found in question la. %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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