Consider a market with two identical firms, Firm A and Firm B. The market demand is: P = 100 –Q where Q = Qa + QB - The cost conditions are MC, = MCg = AC, = 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?

Consider a market with two identical firms, Firm A and Firm B. The market demand is: P = 100 –Q where Q = Qa + QB - The cost conditions are MC, = MCg = AC, = 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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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