Economics: Industrial Economics Question: In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse demand function is P = 300 - 2 Q1, where Q = q1 + q2. Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following: 1. The Nash Equilibrium quantity produced by firm 1 q1* is Choices: A. 33.3 B. 38.3 C. 40 D. 35 2. The Nash Equilibrium quantity produced by firm 2 q2* is Choices: A. 15 B. 53.3 C. 20 D. 21.7 3. The Nash Equilibrium price is Choices: A. 126.7 B. 180 C. 200 D. 190
Economics: Industrial Economics
Question:
In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse
Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following:
1. The Nash
Choices:
A. 33.3
B. 38.3
C. 40
D. 35
2. The Nash Equilibrium quantity produced by firm 2 q2* is
Choices:
A. 15
B. 53.3
C. 20
D. 21.7
3. The Nash
Choices:
A. 126.7
B. 180
C. 200
D. 190
4. The Lerner Index for the market is closest to
Choices:
A. 0.29
B. 0.66
C. 0.43
D. 0.57
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