In a duopoly market, two firms produce the identical products, the cost function of firm 1 is: C, = 20q1, the cost function of firm 2 is: C, 2Q, here Q = qı + 92. 2092, the market demand function is: P = 500 In a Bertrand model, the two firms set their price simultaneously, assume both firms do not have production capacity limits, and there is no collusion. What is the market equilibrium price and quantity? If the two firms decide to form a Cartel, i.e. they want to maximize the profit of the whole industry, and then split the production and profit evenly. What is the market price? What is the
In a duopoly market, two firms produce the identical products, the cost function of firm 1 is: C, = 20q1, the cost function of firm 2 is: C, 2Q, here Q = qı + 92. 2092, the market demand function is: P = 500 In a Bertrand model, the two firms set their price simultaneously, assume both firms do not have production capacity limits, and there is no collusion. What is the market equilibrium price and quantity? If the two firms decide to form a Cartel, i.e. they want to maximize the profit of the whole industry, and then split the production and profit evenly. What is the market price? What is the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I need answers of A, B, C
Transcribed Image Text:1. In a duopoly market, two firms produce the identical products, the cost function of firm 1 is:
C, = 20q1, the cost function of firm 2 is: C2 = 20g2, the market demand function is: P = 500 –
2Q, here Q = q1 + 92.
In a Bertrand model, the two firms set their price simultaneously, assume both firms do not
have production capacity limits, and there is no collusion. What is the market equilibrium price
and quantity?
а.
b. If the two firms decide to form a Cartel, i.e. they want to maximize the profit of the whole
industry, and then split the production and profit evenly. What is the market price? What is the
industry's total quantity produced? What is the quantity produced and profit of each firm?
If firm 1 will produce at the production level from (b) for sure, what is firm 2's optimal
production decision? What is firm 2's maximum profit?
C.
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