In the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew's Industries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing a bundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function, P= 40 - Q/500,000 ; where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year. Assuming that firms are engaged in Cournot Competition, Using the information provided in the scenario, derive a total cost function for a typical cardboard box manufacturer. Use QA to denote the quantity produced by the typical firm.
In the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew's
Industries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing a
bundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function,
P= 40 - Q/500,000 ;
where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year.
Assuming that firms are engaged in Cournot Competition, Using the information provided in the scenario, derive a total cost function for a typical cardboard box manufacturer. Use QA to denote the quantity produced by the
typical firm.
Four firms in a market: Andrew's Industries, Brett's Boxes, Carla's Cardboard, and Delia's Durables
Cardboard boxes are sold in bundles of 100; 1 Bundle = 100 boxes
Market price for a bundle of boxes = $30
No technology cost
Per firm cost of plant and machinery = $7,000,000 per year
Per firm labour, material, and energy cost for a bundle = $20
Demand function for cardboard boxes : P= 40 - Q/500,000
- P = Price per bundle of 100 boxes
- Q =Total number of bundles sold each year
Step by step
Solved in 3 steps
