Cournot’s Model of Duopoly) Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd=5500-25P, where P is the price of a cubic metre of concrete and Qd is the number of cubic metres demanded every year. The marginal cost is $40 per cubic metre. Competition in this market is described by the Cournot model. (a)Given Rebecca’s output is 2000, what is Joe’s residual demand function? What is Joe's output so he maximizes his profit? (b)If Rebecca’s output is qR, what is Joe’s best response function? (c)If Joe’s output is qj, what is Rebecca’s best response function? (d)Plot both Joe and Rebecca’s best response functions on one graph, where the the horizontal axis represents Re
Cournot’s Model of Duopoly) Joe and Rebecca are small-town ready-mix concrete duopolists. The
(a)Given Rebecca’s output is 2000, what is Joe’s residual demand function? What
is Joe's output so he maximizes his profit?
(b)If Rebecca’s output is qR, what is Joe’s best response function?
(c)If Joe’s output is qj, what is Rebecca’s best response function?
(d)Plot both Joe and Rebecca’s best response functions on one graph, where the
the horizontal axis represents Rebecca’s output qR and the vertical axis represents
Joe's output qR.
(e)What is the meaning of the interception of the two best response functions?
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