Consider a homogeneous product industry comprising two firms, N = {1,2}, thatcompete by choosing their production quantities q₁20 and q2 ≥ 0 to maximizeprofits ₁ and ₂, respectively. Demand in this industry is captured in the followinginverse demand function:p = 12 - 2Q,91 +92 is total output. Firm 1 has constant marginal costs of production3 and firm 2 has constant marginal costs of production equal to c₂ = 2.where Q =equal to c₁ =a. Suppose that firms choose their production quantities simultaneously (Cournotcompetition). Solve for both firms' Nash equilibrium production quantities andprofits.b. Suppose now that firms choose production quantities sequentially: firm 1selects its quantity first, then firm 2 observes firm 1's strategy choice beforeselecting its own output quantity (Stackelberg competition). Making sure toexplain your solution method carefully, solve for both firms' subgame perfectNash equilibrium production quantities and profits.Comment on the difference in your results between parts a. and b. of thisquestion.c. Suppose that, in the Stackelberg setting of part b. of this question, firm 2 issuesthe following threat to firm 1:"Unless you produce the Cournot Nash equilibrium quantity stage 1, I willflood the market, turning your profits negative in stage 2 of the game."Will this threat alter the subgame perfect Nash equilibrium outcome of thegame? Explain.

There are two firms - Firm 1 & 2 MC of firm 1: c1 = 3 MC of firm 2 : c2 = 2 In a Cournot…

Consider a homogeneous product industry comprising two firms, N = {1,2}, that compete by choosing their production quantities q₁20 and 9220 to maximize profits ₁ and ₂, respectively. Demand in this industry is captured in the following inverse demand function: p = 12 - 2Q, where Q = 9₁ +92 is total output. Firm 1 has constant marginal costs of production equal to c₁ = 3 and firm 2 has constant marginal costs of production equal to c₂ = 2. a. Suppose that firms choose their production quantities simultaneously (Cournot competition). Solve for both firms' Nash equilibrium production quantities and

Consider a homogeneous product industry comprising two firms, N = {1,2}, that compete by choosing their production quantities q₁20 and 9220 to maximize profits ₁ and ₂, respectively. Demand in this industry is captured in the following inverse demand function: p = 12 - 2Q, where Q = 9₁ +92 is total output. Firm 1 has constant marginal costs of production equal to c₁ = 3 and firm 2 has constant marginal costs of production equal to c₂ = 2. a. Suppose that firms choose their production quantities simultaneously (Cournot competition). Solve for both firms' Nash equilibrium production quantities and

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 8 C(Q) = 120. Determine graphically, and clearly label all of the following: The equilibrium price and quantity for both the competitive market, and for monopoly; the area that correspond to the total benefit to society (the sum of net-benefit to consumers and firms) when replacing the monopoly by a competitive market. Demand is given in the grid below. Suppose firms have cost functions P, Costs 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40
An upstream firm (U) sells an input to a downstream firm (D) which resells it to consumers. The marginal cost of U is 4. Each unit is sold by U to D at a transfer price r. Requirement final is p = 12 - y. a) Suppose U and D are separate firms. Find r, y and p. b) Suppose U and D are one integrated firm. Find p and y. c) Suppose the firms are not integrated, but firm U uses a two-part tariff: it requires payment of r for each unit sold to D; in addition, it requires payment lump sum of T. Find the value of r that U will choose. Find the minimum and maximum values by T. d) Suppose the firms are not integrated, but U imposes a resale price control on firm D. Find the value of r that U will choose, and the constraint that it will impose on the price final p
An upstream firm (U) sells an input to a downstream firm (D) which resells it to consumers. The marginal cost of U is 4. Each unit is sold by U to D at a transfer price r. Requirement final is p = 12 - y. a) Suppose U and D are separate firms. Find r, y and p. b) Suppose U and D are one integrated firm. Find p and y. c) Suppose the firms are not integrated, but firm U uses a two-part tariff: it requires payment of r for each unit sold to D; in addition, it requires payment lump sum of T. Find the value of r that U will choose. Find the minimum and maximum values by T. d) Suppose the firms are not integrated, but U imposes a resale price control on firm D. Find the value of r that U will choose, and the constraint that it will impose on the price final p Plzz give the answer of all questions.
**Practice**
Three electricity generating firms are competing in the market with the inverse demand given by P(Q) = 20 - Q. All %3D firms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K1 = 5 units. Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 2.5 units. Firm 3's marginal cost is MC = 10; it %3D has a capacity constraint of K3 = 2.5 units. A. The three firms compete in the style of Cournot. Please compute the Nash equilibrium quantities. Also compute the price in the Nash equilibrium. B. Which of these firms would have produced a larger quantity if it had a larger capacity? Please explain.
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0:29:15 Suppose that the market demand for a certain product is given by P = 670 – Q. where Qis total industry output. There are only three firms F, F,, F, that manufacture that product. The three firms have the following marginal costs: c = 32, c2 = 34 and C3 = 36. The leader (F) makes a production decision q1. F2, after observing the quantity chosen by F chooses its own quantity q2. Finally F3, after observing the quantities chosen by F, and F, chooses its own quantity q3. a) Determine the output levels that will be produced in a Stackelberg -Nash equilibrium 91 = 93 = b) Determine the price level in such an equilibrium P= c) Determine the profit levels in such an equilibrium U1 = uz=
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