given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB where Qa is the output by Firm A and Qa is the output by Firm B. For both firms marginal cost is given by MC = 20, i=A,B. Assume the firms compete a la Cournot. a) Find the inverse demand in this market. Note that marginal revenue for both firms is given by MRA=500-2QA-QB, MRB=500-QA-2QB. b) Describe what a best-response curve is and how to find it. c) Derive the best-response function for each firm. d) What are the equilibrium quantities? e) What is the total quantity supplied on this market? f) What is the equilibrium price in this market?
given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB where Qa is the output by Firm A and Qa is the output by Firm B. For both firms marginal cost is given by MC = 20, i=A,B. Assume the firms compete a la Cournot. a) Find the inverse demand in this market. Note that marginal revenue for both firms is given by MRA=500-2QA-QB, MRB=500-QA-2QB. b) Describe what a best-response curve is and how to find it. c) Derive the best-response function for each firm. d) What are the equilibrium quantities? e) What is the total quantity supplied on this market? f) What is the equilibrium price in this market?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.1P
Related questions
Question
Answer questions a, b, c
![Consider a duopoly market with 2 firms. Aggregate demand in this market is
given by
Q = 500 – P,
where P is the price on the market. Q is total market output, i.e., Q = QA + Qe,
where Qa is the output by Firm A and QB is the output by Firm B. For both firms,
marginal cost is given by MC = 20, i=A,B.
Assume the firms compete a la Cournot.
a) Find the inverse demand in this market.
Note that marginal revenue for both firms is given by
MRA=500-2QA-QB,
MRB=500-QA-2QB.
b) Describe what a best-response curve is and how to find it.
c) Derive the best-response function for each firm.
d) What are the equilibrium quantities?
e) What is the total quantity supplied on this market?
f) What is the equilibrium price in this market?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2ec8eca2-6e30-4b63-8ed5-19f81be9f829%2F76835e28-bf17-40fa-9a27-c4be7c27cd8d%2F8wlcrxl_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a duopoly market with 2 firms. Aggregate demand in this market is
given by
Q = 500 – P,
where P is the price on the market. Q is total market output, i.e., Q = QA + Qe,
where Qa is the output by Firm A and QB is the output by Firm B. For both firms,
marginal cost is given by MC = 20, i=A,B.
Assume the firms compete a la Cournot.
a) Find the inverse demand in this market.
Note that marginal revenue for both firms is given by
MRA=500-2QA-QB,
MRB=500-QA-2QB.
b) Describe what a best-response curve is and how to find it.
c) Derive the best-response function for each firm.
d) What are the equilibrium quantities?
e) What is the total quantity supplied on this market?
f) What is the equilibrium price in this market?
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