just D and E please thank you All question are with regards to the following set up. There are two firms A and B. Firmscompete in a Cournot Duopoly in Karhide. They set quantities A and qB. Inverse demand isP(qA + 9B) = 18 - 9A-9B and costs are C(q) = 3 * q for both firms. Firm B is a domestic firm(in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engagesin a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm Bproduces and sells q units, firm B receives a payment of s *qg from the government.)You must show yourwork at each step, unless the questions is followed by "No work required." (4)We now consider the government's choice of s≥ 0. We can see from above thatprofits and outputs depend upon s. With that in mind, let TB(s) and qв(s) denote firm B's profitand output as a function of the subsidy s. Let qa(s) denote firm A's equilibrium output as afunction of s. Let G(s) = TB(s) — s* qB(s) denote the government's objective function.(a) We first assume that the government must choose either s = 0 or s = 3. Which of these twochoices makes G(s) bigger?For (b) through (e) we allow the government to choose any s > 0.(b) Find qA(s) and qB (s) as function of s.(c) Find TB (s) as a function of s.(d) Use a first order condition to find the value of s that maximizes G(s). Call this value s*.(e) What is qB (s*)? How does qв (s*) compare to the monopoly output for this market? Explainwhy it makes sense that qB (s*) should take this value.

Cournot Duopoly is a classical model in economics that deals with a specific type of oligopoly,…

(d) Use a first order condition to find the value of s that maximizes G(s). Call this value s*. (e) What is qB (s*)? How does qв (s*) compare to the monopoly output for this market? Explain why it makes sense that qB (s*) should take this value.

(d) Use a first order condition to find the value of s that maximizes G(s). Call this value s. (e) What is qB (s)? How does qв (s) compare to the monopoly output for this market? Explain why it makes sense that qB (s) should take this value.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

just D and E please thank you

(4)
We now consider the government's choice of s≥ 0. We can see from above that
profits and outputs depend upon s. With that in mind, let TB(s) and qв(s) denote firm B's profit
and output as a function of the subsidy s. Let qa(s) denote firm A's equilibrium output as a
function of s. Let G(s) = TB(s) — s* qB(s) denote the government's objective function.
(a) We first assume that the government must choose either s = 0 or s = 3. Which of these two
choices makes G(s) bigger?
For (b) through (e) we allow the government to choose any s > 0.
(b) Find qA(s) and qB (s) as function of s.
(c) Find TB (s) as a function of s.
(d) Use a first order condition to find the value of s that maximizes G(s). Call this value s*.
(e) What is qB (s*)? How does qв (s*) compare to the monopoly output for this market? Explain
why it makes sense that qB (s*) should take this value.

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