3 QUESTION 25Consider a Cournot oligopoly with two fimms, where the demand curves are given byP, = 100-Q,- 202P2 = 100- 20, - Q2and that costa are given by TC(Q,) = Q, . MC, = 2Q1. TC(Q2) = Q?2, and MC2 = 2Q2.Also, marginal revenues can be written as MR, = 100-2Q,- 20,. MR, = 100-20, -2Q,.Now, suppose that a marketing company approaches firm 1 and tells them that they can help them differentiate their product, so that inatead of firm 2 affecting their demand curve in the manner described by the equation in P1 above, they guarantee that firm 1's demand equation after marketing will be of the formP, = 100-Q1- BQ2.where B is estimated to lie somewhere between 0 and 1. In this case, firm 1's marginal revenue function would beMR, = 100 - 2Q1-BQ2Without any further information, and knowing only that B will fall somewhere between O and 1, what is the maximum amount firm 1 should be prepared to pay for these marketing servicee? (There is an exact answer to this question, which I hope for you to arrive at. But in order to avoid decimal/rounding eror, pleasechocse the range within which the correct anawer falla).O Between $850-700.O Between $350-400.O Between $250-300.O Between $1000-1500.

Introduction We have given Cournot oligopoly demand functions of two firms. Marginal revenue of…

Consider a Cournot oligopoly with two firma, where the demand curves are given by P, = 100-Q,-20, P2= 100-20, -Q2 and that coste are given by TC(Q,) = Q, . MC, = 2Q1. TC(Q2) = Q, and MC2 = 20, Also, marginal revenues can be written as MR, = 100- 2Q,-202. MR2 = 100-20,-202 Now, suppose that a marketing company approaches firm 1 and tells them that they can help them differentiate their product, so that inatead of firm 2 affecting their demand curve in the manner desoribed by the equation in P, above, they guarantee that firm 1's demand equation after marketing will be of the form P, = 100-Q-pQ where B is ostimated to lie somewhere between O and 1. In this case, firm 1's marginal revenue function would be MR, - 100- 2Q,-B0 Without any further information, and knowing only that B will fall somewhere between O and 1, what is the maximum amount firm 1 should be prepared to pay for these marketing services? (There is an exact anawer to this question, which I hope for you to arrive at. But in order to avoid decimal/rounding error, please choose the range within which the correct answer falle). O Between S050-700. O Between $350-400. O Between $250-300. O Between $1000-1500.

Consider a Cournot oligopoly with two firma, where the demand curves are given by P, = 100-Q,-20, P2= 100-20, -Q2 and that coste are given by TC(Q,) = Q, . MC, = 2Q1. TC(Q2) = Q, and MC2 = 20, Also, marginal revenues can be written as MR, = 100- 2Q,-202. MR2 = 100-20,-202 Now, suppose that a marketing company approaches firm 1 and tells them that they can help them differentiate their product, so that inatead of firm 2 affecting their demand curve in the manner desoribed by the equation in P, above, they guarantee that firm 1's demand equation after marketing will be of the form P, = 100-Q-pQ where B is ostimated to lie somewhere between O and 1. In this case, firm 1's marginal revenue function would be MR, - 100- 2Q,-B0 Without any further information, and knowing only that B will fall somewhere between O and 1, what is the maximum amount firm 1 should be prepared to pay for these marketing services? (There is an exact anawer to this question, which I hope for you to arrive at. But in order to avoid decimal/rounding error, please choose the range within which the correct answer falle). O Between S050-700. O Between $350-400. O Between $250-300. O Between $1000-1500.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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