Consider two firms that compete according to the Cournot model. Inverse demand is P (Q) = 16 − Q. Their cost functions are C (q1) = 2q1 and C (q2) = 6q2 (a) Solve for Nash equilibrium quantities of each firm (b) Suppose firm 2 becomes more inefficient and its cost function changes to C (q2) = xq2 where x > 6. How large must x be to cause firm 2 to not want to produce anything in equilibrium?
Q: Processing Insurance Claims Your insurance firm processes claims through its newer, larger,…
A: Cost analysis is a crucial tool in the process of deciaion making. Organizations can increase…
Q: a) Does purchasing power parity hold? If not, does PPP predict that the $C (loonie) real will…
A: In this scenario, we delve into the dynamics of exchange rate predictions and interest rate…
Q: 12. Give an example of a public good, and explain why it is a public good. What would happen if we…
A: A public good is a type of good that is non-excludable and non-rivalrous in nature. This means that…
Q: Suppose that actual inflation is 2.5 percent, the Fed's inflation target is 2 percentage points, and…
A: The Taylor Rule is a monetary policy guideline developed by economist John B. Taylor that suggests…
Q: A firm’s isoquant map is depicted below. Which of the following statements are true?
A: An isoquant curve refers to the concave line plotted on a graph, showing all of the various…
Q: A monopsonist in the labor market has Select one: A. an upward-sloping labor supply curve. B. a…
A: A monopsonist is a market structure in which there is a single buyer (employer) for a particular…
Q: The following table shows how much wine and cloth can be produced in Canada and in Portugal with the…
A: Opportunity Cost is a fundamental economic concept that refers to the value of the next best…
Q: Assume the classical view of the labor market. An auto worker is laid off. After looking for a job…
A: A labor market refers to the marketplace where individuals who offer their skills, abilities, and…
Q: Between 1996 and 2006, technological advances lowered the cost of producing cellular phones. The…
A: A perfectly competitive firm earns zero profit in the long run. And the price charged by a perfectly…
Q: Compare the market multiple, LBO, and DCF models and discuss which one you prefer when it comes to…
A: Market Multiple, LBO (Leveraged Buyout), and DCF (Discounted Cash Flow) are three common valuation…
Q: Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75…
A: Federal Bank is defined the Central Bank of an economy. it is a government owned bank.
Q: of unseasonably good weather occurs, allowing walnut growers to produce more walnuts per hectare.…
A: Favorable conditions can increase demand and supply for a product or service. For instance, improved…
Q: (Table: City Sanitation in Winnetka) Use Table: City Sanitation in Winnetka. Suppose that the…
A: The optimal quantity is where the marginal benefit is equal to the marginal cost. The marginal…
Q: 7. Consider the pros and cons of rent control in a large, densely packed city. Remember that rent…
A: A price ceiling is a government-imposed limit on how high a price can be charged for a specific…
Q: 20. How is a monopoly (or oligopoly for that matter) able to remain that way? Okay, let's say a…
A: A monopoly is a market structure in economics where a single seller or producer holds exclusive…
Q: If a firm has the production function q = f(L, K) = L + 2K, then its technology exhibits:…
A: The production function shows the relationship with the input used and output produced. There is…
Q: Question 2. Suppose in an experiment, you randomly hand out a chocolate to half of the subjects in a…
A: Utility refers to the subjective measure of satisfaction, happiness, or benefit that an individual…
Q: Eugenia's Patisserie operates in a perfectly competitive industry. When the market price of cupcakes…
A: Perfectly competitive industry is the type of market structure where many small firms produce…
Q: Because it takes six to eight years before newly planted blueberry plants reach full production, the…
A: A price ceiling is a binding maximum price that a seller can charge for his goods or services. This…
Q: Vault cash is included in which of the following measures of the money supply of the United States?…
A: It can be defined as the physical form of money which encompasses coins and notes these physical…
Q: 2-5 Kraft and Cadbury When Kraft recently bid $16.7 billion for Cadbury, Cadbury’s market value…
A: The amount that a collection of products and services have increased in price during a specific time…
Q: What can the Solow model tell us about growth in the short term and in the long term? What is…
A: The Solow Model basically explains how countries' economies grow over time. It suggests that an…
Q: 4. The following table shows information on the demand and supply for apples at a local farmers'…
A: Demand is amount of a good that consumers are willing and able to purchase at different price…
Q: aexplain three reasons why aggregate demand curve slopes downward.
A: Aggregate demand is the summation of all total demand from finished goods and services produced by…
Q: Use the orange points (square symbol) to plot the production function on the following graph. Assume…
A: In economics, total product refers to the output produced by all the workers. Marginal product…
Q: Use Figure 1 to answer question 11. otal revenue (millions of dollars) 40 30 20 Figure 1 h
A: There exist some relationship between the total revenue and the price elasticity of demand.If the…
Q: 2. Three agents are characterized by the following utility functions: Al: u₁(x) = ln(x) A2: u₂(x) =…
A: A utility function is a concept primarily used in economics and decision theory to represent an…
Q: how can the healthcare economy be fixed? How can we solve healthcare problems?
A: The part of the economy concerned with economic activities associated with the production,…
Q: 4. Consider the standard Ramsey model where the planner chooses time paths for the representative…
A: In the given Ramsey model, the planner aims to maximize the discounted utility of consumption over…
Q: Use the graph below to answer the following questions: D, is the transactions demand for money, Dm…
A: Transaction demand for money refers to the demand for money that arises from the need to facilitate…
Q: (a) At date 0 information is revealed that there will be a (temporary) increase in A at date t₁, and…
A: In the given Ramsey model, the planner aims to maximize the discounted utility of consumption over…
Q: TransTech sells its product for $150. Marginal cost is a constant $135 per unit and fixed costs are…
A: Break Even Point: For a firm the breakeven point is the point at which it is neither earning profits…
Q: 7. Regulating a natural monopoly Consider the local talephone company, a natural monopoly. The…
A: A natural monopoly is a type of monopoly in an industry with high barriers to entry and start-up…
Q: 34. At the profit-maximising level of output, the firm is A. Incurring an economic loss equal to…
A: The profit-maximizing level occurs at a point where marginal revenue (MR) is equal to marginal cost…
Q: Kristin Forbes in her American Economic Review (2000) article investigates the relationship between…
A: In simple terms, regression analysis seeks to find a mathematical equation that best fits the…
Q: Suppose that the public holds half of the money supply in currency. The reserve requirement is 20%.…
A: Money multiplier refers to potential increase in money supply that results from a change in monetary…
Q: Under the supply-side view, an increase in marginal tax rates results in an increase in real GDP.…
A: Marginal tax refers to the tax rate applied to the last dollar of income earned by individual.This…
Q: The short-run equilibrium output level is $6 trillion exists in the labor market of this economy. ,…
A: The level of production produced by enterprises and the price level over the long term are related…
Q: QUESTION 6 Which of the following was a mistake of the Classical School of thought? A. Marginal…
A: Normative statements express opinions or value judgments about what ought to be, rather than…
Q: Prve Cotting Refer to Figure 6-4. Without the price ceiling in this market for gasoline, what will…
A: An individual’s willingness to pay for each unit of the quantity he or she wishes to consume is…
Q: Which of the following statements is not correct? a) Competitive markets tend to limit the…
A: b) Differences in earnings of whites and blacks or men and women provide clear evidence of…
Q: what is economics and what are its branchs? what is the advantage of studying economics? how…
A: The term economics has its root from the Greek word "Oikonomia" which means to manage a household.…
Q: 1. Would a monetary policy intended to bring about disinflation cause a greater increase in…
A: "As per our policy, we can provide you with the answer to the first question only. Kindly repost the…
Q: Consider a labour market with 3 types of workers: great workers, normal workers, and perpetually…
A: Labor Market Equilibrium:A state in which the demand for labor (workers) by firms matches the supply…
Q: Consider a pure exchange economy with two goods. (a) Show that the gross substitute property implies…
A: General equilibrium has been characterised in the study of microeconomics as every marketplace…
Q: Morginal cost and marginal benefit (dollors per pound) 2 0 MSC MSB 100 200 300 400 500 600 Quantity…
A: Maximum efficiency in economics refers to the condition wherein an economy employs its resources…
Q: a)Calculate the marginal products of labour and capital. b)What is the value of marginal rate of…
A: Marginal product is the additional units of output that are produced by hiring one adiitional units…
Q: In the late 1990s, car leasing was very popular in the United States. A customer would lease a car…
A: Adverse selection is a type of market failure that occurs due to the presence of asymmetric…
Q: 1) Suppose that Labor Supply is linear with exactly 0M people willing to work at a wage of $0 and 5M…
A: Labor supply represents the number of people willing to work at different wage levels. Equilibrium…
Q: In the dynamic model of AD-AS in the diagram to the right, the economy is at point A in year 1 and…
A: Macroeconomic monitoring will continue to be important since it determines the final direction of…
Consider two firms that compete according to the Cournot model. Inverse demand is P (Q) = 16 − Q.
Their cost functions are C (q1) = 2q1 and C (q2) = 6q2
(a) Solve for Nash
(b) Suppose firm 2 becomes more inefficient and its cost function changes to C (q2) = xq2 where x > 6. How large must x be to cause firm 2 to not want to produce anything in equilibrium?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Consider a market that only includes two large firms. The (inverse) market demand is P = 100 – Q. 3q2. Firm 1 has a cost function of C, = 2q1, and firm 2 has a cost function of C2 Use a Cournot model to calculate the Nash equilibrium outputs q, and q2 of the two firms. and 92 (a) Give each firm's profit as a function of (b) Compute the Nash equilibrium q, and q2.Consider two firms that produce the same good and compete setting quantities. The firms face a linear demand curve given by P (Q) = 1 − Q, where the Q is the total quantity offered by the firms. The cost function for each of the firms is c(qi) = cqi, where 0 < c < 1 and qi is the quantity offered by the firm i = 1,2. Find the Nash equilibrium output choices of the firms, as well as the total output and the price, and calculate the output and the welfare loss compared to the competitive outcome. How would the answer change if the firms compete setting prices? What can we conclude about the relationship between competition and the number of firms?1. The market (inverse) demand function for a homogeneous good is P(Q) = 10 - Q. There are two firms: firm 1 has a constant marginal cost of 2 for producing each unit of the good, and firm 2 has a constant marginal cost of 1. The two firms compete by setting their quantities of production, and the price of the good is determined by the market demand function given the total quantity. a. Calculate the Nash equilibrium in this game and the corresponding market price when firms simultaneously choose quantities. b. Now suppose firml moves earlier than firm 2 and firm 2 observes firm 1 quantity choice before choosing its quantity find optimal choices of firm 1 and firm 2.
- 1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). Now assume firm A chooses quantity first. Firm B observes this choice and then chooses its own quantity. d)Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e)What is the equilibrium price, and how much profit does each firm collect?Consider two firms that produce the same good and competesetting quantities. The firms face a linear demand curve given by P(Q) =1 − Q, where the Q is the total quantity offered by the firms. The costfunction for each of the firms is c(qi) = cqi, where 0 < c < 1 and qiis the quantity offered by the firm i = 1, 2. Find the Nash equilibriumoutput choices of the firms, as well as the total output and the price, andcalculate the output and the welfare loss compared to the competitiveoutcome. How would the answer change if the firms compete settingprices? What can we conclude about the relationship between competitionand the number of firms?Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities. Firm 1 has a constant marginal cost of 20. Firm 2 has a constant marginal cost of 80. Demand in the industry is given by D(p) = 380 - p. Let q1 and 92 denote the quantities of firm 1 and 2, respectively. Derive the Nash equilibrium in quantities. What is the total production in this industry?
- Consider the Cournot competition between two firms with different marginal costs. For firm 1, let the cost function be: C1(q1)-3*q1 For firm 2, let the cost function be: C2(q2)-6*q2 The inverse demand function is: P(Q)=12-Q, where Q=q1+q2 In this game, write down the profit functions for firm 1 and firm 2 (as functions of q1 and q2). Then, find the Nash equilibrium quantities for firm 1 and firm 2. In the NE, which firm produces more: the one with the low or the high marginal cost? Note: To get credit, you need to show your calculations and explain your answer.10Two firms produce differentiated products. The demand for each firm’s product is as follows: Demand for Firm 1: q1 = 20 – 2p1 + p2 Demand for Firm 2: q2 = 20 – 2p2 + p1 Both firms have the same cost function: c(q) = 5q. Firms compete by simultaneously and independently choosing their prices and then supplying enough to meet the demand they receive. Please compute the Nash equilibrium prices for these firms.QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)
- The inverse market demand curve for salmon is given by P(Y) = 100 – 2Y, and the total cost function for any firm in the industry is given by TC(y) = 4y. a. Suppose that two Cournot firms operated in the market. What would be the reaction function for Firm 1 and the reaction function of Firm 2? (Notes: The marginal cost is not zero). If the firms were operating at the Cournot equilibrium point, what would the industry output and price be? b. For the Cournot case, draw the two reaction curves and indicate the equilibrium point on the graphThere are two firms that are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1's and Firm 2's output, q₁+q2. Each firm's marginal cost is constant at 12, and fixed cost are 0. Answer the following question, assuming that the firms are Cournot competitors. a. Calculate each firm's reaction function and illustrate them graphically (15 points) b. How much output does each firm produce? (12.5 points) c. What is the market price? (7.5 points) d. How much profit does each firm earn? What is the industry profit? (10 points)Two firms who make identical products engage in Cournot competition. The inverse market demand curve is: P(Q) = 60 - 10Q, where Q=9₁ +92. The cost functions are C₁(9₁) 1091 and C₂ (92) : 592 for firms 1 and 2, respectively. Find the Nash equilibrium quantities for each firm. (a) 9₁ = = 1.5, 92 2 (b) q₁ = 92 = 2 (c) q₁ = 92 = 1.5 (d) 9₁ = 1.5, 92 = 3 (e) None of the above options is correct.