All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities q₁ and qв. Inverse demand is P(9A + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qв units, firm B receives a payment of s* q3 from the government.) You must show your work at each step, unless the questions is followed by "No work required." (2) Assume that s = 0 (there is no subsidy.) (a) Write down firm A's profit function. (No work required.) (b) Find each firm's best response function. (You may do this directly or by settings to zero in your expressions from (1b). (c) Solve for equilibrium outputs (9A, 93). You may either use the symmetry in this problem to assume a symmetric solution, or solve for firm B's best response and solve the two best responses simultaneously. (I recommend the first approach.) (d) Solve for the equilibrium price. (e) Solve for the equilibrium profits.

All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities q₁ and qв. Inverse demand is P(9A + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qв units, firm B receives a payment of s* q3 from the government.) You must show your work at each step, unless the questions is followed by "No work required." (2) Assume that s = 0 (there is no subsidy.) (a) Write down firm A's profit function. (No work required.) (b) Find each firm's best response function. (You may do this directly or by settings to zero in your expressions from (1b). (c) Solve for equilibrium outputs (9A, 93). You may either use the symmetry in this problem to assume a symmetric solution, or solve for firm B's best response and solve the two best responses simultaneously. (I recommend the first approach.) (d) Solve for the equilibrium price. (e) Solve for the equilibrium profits.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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All question are with regards to the following set up. There are two firms A and B. Firmscompete in a Cournot Duopoly in Karhide. They set quantities qA and qB. Inverse demand isP(qA + qB) = 18 − qA − qB and costs are C(q) = 3 ∗ q for both firms. Firm B is a domestic firm(in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engagesin a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm Bproduces and sells qB units, firm B receives a payment of s ∗ qB from the government.)You must show your work at each step, unless the questions is followed by ”No work required.” We now consider the government’s choice of s ≥ 0. We can see from above thatprofits and outputs depend upon s. With that in mind, let πB(s) and qB(s) denote firm B’s profitand output as a function of the subsidy s. Let qA(s) denote firm A’s equilibrium output as afunction of s. Let G(s) = πB(s) − s ∗ qB(s) denote the government’s objective function (d)…
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All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities qa and qB. Inverse demand is P(qA + qB) = 18 – qA – qB and costs are C(q) (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s * qB from the government.) You must show your work at each step, unless the questions is followed by "No work required." 3 * q for both firms. Firm B is a domestic firm (4) We now consider the government’s choice of s≥0. We can see from above thatprofits and outputs depend upon s. With that in mind, let πB(s) and qB(s) denote firm B’s profit and output as a function of the subsidy s. Let qA(s) denote firm A’s equilibrium output as a function of s. Let G(s) = πB(s) − s*qB(s) denote the government’s objective…
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There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities qA and qB. Inverse demand isP(qA +qB) = 18−qA −qB and costs are C(q) = 3∗q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s ∗ qB from the government.) We begin by examining the model with an unspecified s ≥ 0. A)Find profit functions for both firms. B)Use first order conditions to find each firm’s best response function.
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Suppose we have a duopoly with Firm 1 and Firm 2 and the following inverse demand function:P = 100 – 5(Q1 + Q2)Total Cost and Marginal Cost values for firms 1 and 2 are:TC1 = 20Q1TC2 = 30Q2MC1 = 20MC2 = 30Assuming a Cournot Duopoly, the following response functions are derived:Firm 1: Q1 = 8 – 0.5Q2Firm 2: Q2 = 7 – 0.5Q1Using this information, calculate the quantity produced for each firm, the price, and profits foreach firm and the market as a whole.
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