d) Solve for the Bertrand equilibrium output, price and profit for each firm. Explain your calculations. Does the solution justify the Bertrand paradox? Consider a market with two identical firms, Firm A and Firm B. The market demand is:1P = 100 -where Q = Qa + QB - The cost conditions are MCA = MCg = ACĄ = ACg = 24.(Hint: Round your solutions to 2 decimal places.)a) Assume this market has a Stackelberg leader, Firm A. Solve for the quantity, price andprofit for each firm. Explain your calculations.b) How does this compare to the Cournot-Nash equilibrium quantity, price and profit?Explain your calculations.c) Present the Stackelberg and Cournot equilibrium output using a diagram.d) Solve for the Bertrand equilibrium output, price and profit for each firm. Explain yourcalculations. Does the solution justify the Bertrand paradox?

In the oligopoly market structure, the decision of one firm is dependent on the decision of another…

Answered: Consider a market with two identical…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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d) Solve for the Bertrand equilibrium output, price and profit for each firm. Explain your calculations. Does the solution justify the Bertrand paradox?

Consider a market with two identical firms, Firm A and Firm B. The market demand is:
1
P = 100 -
where Q = Qa + QB - The cost conditions are MCA = MCg = ACĄ = ACg = 24.
(Hint: Round your solutions to 2 decimal places.)
a) Assume this market has a Stackelberg leader, Firm A. Solve for the quantity, price and
profit for each firm. Explain your calculations.
b) How does this compare to the Cournot-Nash equilibrium quantity, price and profit?
Explain your calculations.
c) Present the Stackelberg and Cournot equilibrium output using a diagram.
d) Solve for the Bertrand equilibrium output, price and profit for each firm. Explain your
calculations. Does the solution justify the Bertrand paradox?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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