If a duopolist has a linear demand curve of the form Q=400 – P. Assuming each firm has total cost (TC=3000+100Q). Calculate the profit-maximizing price-quantity combinations using the following four oligopoly pricing models listed below demonstrating that: a. Under the Quasi-competitive model, the firm will make a loss equivalent to fixed cost. b. Under the Stackelberg’s model the leader will earn more than twice the profit of the follower and that total industry profits will be lower than under both Cournot and Cartel models. Explain why this is would be the case
If a duopolist has a linear demand curve of the form Q=400 – P. Assuming each firm has total cost (TC=3000+100Q). Calculate the profit-maximizing price-quantity combinations using the following four oligopoly pricing models listed below demonstrating that: a. Under the Quasi-competitive model, the firm will make a loss equivalent to fixed cost. b. Under the Stackelberg’s model the leader will earn more than twice the profit of the follower and that total industry profits will be lower than under both Cournot and Cartel models. Explain why this is would be the case
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.1P
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If a duopolist has a linear demand curve of the form Q=400 – P. Assuming each firm has total cost (TC=3000+100Q). Calculate the profit-maximizing price-quantity combinations using the following four oligopoly pricing models listed below demonstrating that:
a. Under the Quasi-competitive model, the firm will make a loss equivalent to fixed cost.
b. Under the Stackelberg’s model the leader will earn more than twice the profit of the follower and that total industry profits will be lower than under both Cournot and Cartel models. Explain why this is would be the case.
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