Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100-P, where is the total quantity produced. Firm 1's marginal cost is MC1 = 91. Firm 2's marginal cost of production is MCH=4 with probability 0.25 and MC₂ = 2 with probability 0.75. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the market clearing price? 41/2 215/4 167/4 if the cost is high and 155/4 if the cost is low 167/4 if the cost is high and 163/4 if the cost is low
Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100-P, where is the total quantity produced. Firm 1's marginal cost is MC1 = 91. Firm 2's marginal cost of production is MCH=4 with probability 0.25 and MC₂ = 2 with probability 0.75. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the market clearing price? 41/2 215/4 167/4 if the cost is high and 155/4 if the cost is low 167/4 if the cost is high and 163/4 if the cost is low
Chapter1: Making Economics Decisions
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Transcribed Image Text:Question 22
Consider the following Cournot duopoly. Both firms produce a homogenous good.
The demand function is Q = 100-P, where is the total quantity produced.
Firm 1's marginal cost is MC1 = 91. Firm 2's marginal cost of production is
MCH = 4 with probability
0.25 and MC₂ = 2 with probability 0.75. Firm 2
knows its own cost function and firm 1's cost function. Firm 1 knows its own cost
function and the probability distribution of firm 2's marginal cost. What is the
market clearing price?
41/2
215/4
167/4 if the cost is high and 155/4 if the cost is low
167/4 if the cost is high and 163/4 if the cost is low
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