Assume for simplicity that a monopolist has no costs of production and faces a demand curve given by Q = 150 – P. (a) Calculate the profit-maximizing quantity-price combination for this monopolist. Also calculate the monopolist's profits. (b) Suppose instead that there are two firms in the market facing the demand and cost conditions just described for their identical products. Firms choose quantities simultaneously as in the Cournot model. Compute the outputs in the Nash equilibrium. Also compute market output, market price and each firm's profits. (c) Consider the same two firms as in part (b). However, instead of choosing their respective quantities simultaneously, the two firms engage in the Stackelberg version of the game in which firm 1 chooses first and then firm 2 chooses q,. Compute each firm's equilibrium quantity, the market price and quantity, and each firm's profits.

Assume for simplicity that a monopolist has no costs of production and faces a demand curve given by Q = 150 – P. (a) Calculate the profit-maximizing quantity-price combination for this monopolist. Also calculate the monopolist's profits. (b) Suppose instead that there are two firms in the market facing the demand and cost conditions just described for their identical products. Firms choose quantities simultaneously as in the Cournot model. Compute the outputs in the Nash equilibrium. Also compute market output, market price and each firm's profits. (c) Consider the same two firms as in part (b). However, instead of choosing their respective quantities simultaneously, the two firms engage in the Stackelberg version of the game in which firm 1 chooses first and then firm 2 chooses q,. Compute each firm's equilibrium quantity, the market price and quantity, and each firm's profits.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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