Consider a Cournot oligopoly with n = 2 firms. Firm 1 cost function is TC₁ (9₁) = 20 + 12q₁ + q², while firm 2 cost function is TC₂ (9₂) = 50 +8q2 + q² . The total market demand is P(Q) = 50 – 2Q, where Q is the total quantity produced by all (active) firms in the industry. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and profit for each firm. Which firm is making higher profits? b- Consider the situation in which a third firm (firm 3) enters the market. What is the total equilibrium quantity, price, quantity and profit for each firm if TC3 = TC₁? [hint: q₁ and 93 will be the same, since 1 and 3 are identical] c- How would your answer at point b change if instead TC3 = TC₂? Would consumers prefer firm

Consider a Cournot oligopoly with n = 2 firms. Firm 1 cost function is TC₁ (9₁) = 20 + 12q₁ + q², while firm 2 cost function is TC₂ (9₂) = 50 +8q2 + q² . The total market demand is P(Q) = 50 – 2Q, where Q is the total quantity produced by all (active) firms in the industry. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and profit for each firm. Which firm is making higher profits? b- Consider the situation in which a third firm (firm 3) enters the market. What is the total equilibrium quantity, price, quantity and profit for each firm if TC3 = TC₁? [hint: q₁ and 93 will be the same, since 1 and 3 are identical] c- How would your answer at point b change if instead TC3 = TC₂? Would consumers prefer firm

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A homogenous-good duopoly faces a market demand function of P= 14 - Q, where Q = Q1 + Q2. Both firms have the same structure of total cost functions as follows: TC =2 + 2Q1, where Q, is Firm 1's output level. TC2 = 2 + 2Q2, where Q2 is Firm 2's output level. Suppose that Firm 1 sets its output level first and then Firm 2, after observing Firm 1's output level, makes its output decision. What is the market price (P*) at a Stackelberg equilibrium? P* = $10. %3D P* = $8. O P* = $6. P* $5. None of the above.
Oligopoly Consider a market in which the market demand curve is given by P= 18 - Q, Firm 1 has a marginal cost of 3, while Firm 2 has amarginal cost of 6. Find the Cournot equilibrium output. What arethe Stackelberg equilibrium output if firm 1 act as the leader?
In the duopoly market where two firm exist, the demand curve is given as follows. P=120-y (y is the total market output) Firm1 has a marginal cost of 10 and Firm 2 has a marginal cost of 20. 1. Determine the Firm1’s reaction function and the Firm2’s reaction function. 2. What is the output of each firm in the Cournot equilibrium? 3. Firm1 is Stackelberg leader, Firm2 is Stackelberg follower. How much should the leader produce in order to maximize profits? I don't know the answer of number 2 and 3. some says number 2 answer is both 60 but some also says that its each 60 and 40 units. Also, for number 3, some says its maximize profit is 140 but some says 80. I don't know what the correct answer is. please show me the correct answer and correct explanantion.
The (inverse) market demand function in a homogeneous product Cournot duopoly is as follows: P = 200- 10(Q1+Q2). The total cost functions are TC- 100 + 40Q1 for firm one and TC = 80 + 60Q2 for firm two. 1. Determine the reaction function for each firm. 2. Calculate each firm's equilibrium level of output. 3. Calculate the market equilibrium price. 4. Calculate the profit each firm earns in equilibrium.
Suppose that two firms are Cournot competitors. Industry demand is given by: P = 200 – q, - q, where q, is the output of Firm 1 and q, is the output of Firm 2. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. Solve for the Cournot price, quantity, and firm profits.
1.6. Consider the Cournot duopoly model where inverse demand is P(Q) = a - Q but firms have asymmetric marginal costs: c₁ for firm 1 and c2 for firm 2. What is the Nash equilibrium if 0 a+c₁?
Consider the following Cournot Duopoly diagram... Firm 1 Reaction Function r₁ A 6 C 0 E no Isoprofit curves for firm 1 Firm 2 Reaction Function 1₂ At what point is the Cournot equilibrium achieved? Q₁
Two firms sell substitutable products; the market price is: P = 90-Q, where Q Q₁ + Q2 is the total market quantity, which consists of Q1₁ (the quantity produced by Firm 1) and Q2 (the quantity produced by Firm 2). The firms choose their quantities simultaneously. Firm 1's costs are C₁ 6Q₁ + Q². Firm 2's costs are C₂ = Q². = O Which is the payoff function for Firm 2? O π₂ = 90Q₂ - 2 Which is the best response function for Firm 1? O π₂ = 90Q₂ - Q²². πT2 π₂ = 45 - Q² Q₁ Q₂₁ 2 O π₂ = 45 - 1²/20₁². Q₁ Q₁ 3 = 16. ²/Q²-Q₁2. = 32- 2- 1/1/202₂. 3 Q₁ = 45. Q1 = 40 + ²/Q₂₁ 2.2. = 10- -
Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 28q. Assume that the demand curve for the industry is given by P = 100 - Q and that each firm expects the other to behave as a Cournot competitor. Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output level that maximizes its profits when taking its rival's output as given. What are the profits of each firm? (Round all quantities and dollar amounts to two decimal places.) When competing, each firm will produce units of output.
Two firms engage in Cournot competition in the Everlasting Gobstopper industry. The price elasticity of demand is-2. Firm 1 has aconstant marginal cost of $110.00 per unit, and firm 2 has a constant marginal cost of $181.50 per unit. If the two firms are currently inequilibrium, what is firm 2's share of the market? Enter your answer as a decimal, rounded to two places if necessary.______ Please show all steps
Suppose that identical duopoly firms have constant marginal costs of $10 per unit. Firm 1 faces a demand function of q1 = 70 – 2p1 + 1p2, where q, is Firm 1's output, p, is Firm 1's price, and p, is Firm 2's price. Similarly, the demand Firm 2 faces is 92 = 70 – 2p2 + 1p1- Solve for the Bertrand equilibrium. In equilibrium, p1 equals $ and P2 equals $ (Enter numeric responses using integers.)
A homogenous-good duopoly faces an inverse market demand function of p = 150 − Q. Assume that both firms face the same constant marginal cost, MC1 = MC2 = 30. Calculate the output of each firm, the market output, and the market price in a Nash-Cournot equilibrium Re-solve part (a) assuming that the marginal cost of firm 1 falls to MC1 =20 Explain what will happen to each firm’s output, the market output, and the market price if the two firms can collude (e.g., form a cartel)