Firms 1 and 2 produce a homogeneous product in the market, with market demand Q=200-p. Each firm i ci=1, 2) has the cost function C(O₂) = 40 +20 Q₂, where Qz is firm i's output. ltat (a). What is the Cournot equilibrium output per firm and price in this market? youb). What would the equilibrium price in this market be if the two firms collude to xe Set outputs to maximize total industry profits? (C). Suppose firm I is the leader and chooses output first, while firm 2 is the

Firms 1 and 2 produce a homogeneous product in the market, with market demand Q=200-p. Each firm i ci=1, 2) has the cost function C(O₂) = 40 +20 Q₂, where Qz is firm i's output. ltat (a). What is the Cournot equilibrium output per firm and price in this market? youb). What would the equilibrium price in this market be if the two firms collude to xe Set outputs to maximize total industry profits? (C). Suppose firm I is the leader and chooses output first, while firm 2 is the

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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In the domestic airline market, where companies compete on the number of seats they make available in the market measured in millions (x), the inverse of the demand for seats is pd(x) = 40 - 4x.Assume that there are 2 airlines: LON and Pacific Airlines. The marginal cost per seat of both airlines is 10:(a) Determine the market equilibrium (quantity produced by each firm, market price and profits). Graph(b) Assume that LON and Aerolineas del Pacifico collude and act as a monopoly. Calculate the number of seats (x) and the selling price.(c) What is the efficient number of seats that should be made available to consumers, and at what price would each seat be sold?
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 graph
Suppose that there are two firms in an industry and they face market demand y=400-0.5p where y=y1+y2 . The total cost functions of the firms are C1(y1)= 40y1 and C2(y2)= 2y22. a) Assume initially that the firms enter into Cournot competition. Calculate the equilibrium market price and each firm’s equilibrium output. That is, find y1c, y2sand pc.b) Calculate the equilibrium market price and each firm’s equilibrium output assuming that firm 2 is the Stackelberg leader and firm 1 is the follower. That is, find y1s, y2sand ps.
Suppose we have two identical firms A and B, selling identical products. They are the only firms in the market and compete by choosing quantities at the same time. The Market demand curve is given by P=477-Q. The only cost is a constant marginal cost of $16. Suppose Firm A produces a quantity of 66 and Firm B produces a quantity of 49. If Firm A decides to increase its quantity by 1 unit while Firm B continues to produce the same 49 units, what is the Marginal Revenue for Firm A from this extra unit? Enter a number only, no $ sign. Don't forget to include the negative sign if revenue decreases.
Here is a market with three firms: 1, 2, and 3. The demand curve is P=100-Q. There is no fixed cost but the marginal cost 10 for all firms. Firm 1 is a leader firm so that it decides the quantity Q1 first. Then two firms respectively decide their quantities Q2 and Q3 simultaneously. 1) At an equilibrium (SPE), Q1 is Q2=Q3= 2) At the equilibrium, (the market quantity) Q= and (the market price) P= 3) The profit of firm 1 is while the profit of firm 2 and 3 respectively is
1. Consider a market where there are only two firms that produce a homogeneous product. The two firms face the direct market demand curve given Q = 15-p, where Q = 9₁ +92 and 9₁ and q2 are the quantities of firm 1 and firm 2, respectively. Suppose firm 1's total cost is C₁ = 9₁ and firm 2's total cost function is C₂ = 2q2. Suppose that the two firms act independently and choose their outputs simultaneously as in the Cournot model. Show the basis and briefly explain what is going on as you answer each of the following questions. Your mark will depend upon the correctness of your basis and explanation. 1. What is the equation of the demand curve faced by firm 1? What is the equation of the demand curve faced by firm 2? Find the output reaction function of each firm. 2. 3. Find the Nash-Cournot equilibrium quantity that each firm will produce. 4. At the Nash-Cournot equilibrium, at what price does each firm sell its output? 5. Find the consumer surplus, producer surplus at the…
The marginal cost of a product is fixed at MC = 20. The demand for the product is Q = 100 - 2P. (a) Now consider a Cournot model with two firms that are choosing quantities simultaneously. What is the best reply (best response) function for each firm? What is theNash equilibrium? What is the total surplus? (b)What do you expect the total surplus would be with three firms? Why? (You do not need to calculate an exact value. You can say ”total surplus is at least 100”, or ”total surplus is at most 80”)
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Consider an industry composed of 3 firms and facing demand: P(Q) = 1- Q, where Q = q1 + q2 + q3.The three firms are identical, each producing using a plant that exhibits quadratic cost C(q.) = q?. What are the Cournot equilibrium quantity and prices?
Two firms sells an identical product. The demand function for each firm is given: Q = 20 - P, where Q = q1 + q2 is the market demand and P is the price. The cost function for reach firm is given: TCi = 10 + 2qi for i = 1, 2. a) If these two firms collude and they want to maximize their combined profit, how much are the market equilibrium quantity and price? b) If these two firms decide their production simultaneously, how much does each firm produce? What is the market equilibrium price? c) If Firm 1 is a leader who decides the production level first and Firm 2 is a follower, how much does each firm produce? What is the market equilibrium price?
Consider an industry with N firms that compete by setting the quantities of an identical product simultaneously. The resulting market price is given by: p = 1000 − 4Q. The total cost function of each firm is C(qi) = 50 + 20qi . (a) Derive the output reaction of firm i to the belief that its rivals are jointly producing a total output of Q-i . Assuming that every firm produces the same quantity in equilibrium, use your answer to compute that quantity. (b) Suppose firms would enter (exit) this industry if the existing firms were making a profit (loss). Write down a mathematical equation, the solution to which would give you the equilibrium number of firms in this industry. You don’t have to solve this equation.