In the same market as Question 2, suppose Firm 2 does participate as a profitmaximizer, and the firms reach Cournot equilibrium. How many units will Firm 1be producing?11

Profit of the duopolists are: For profit maximization under Cournot assumption, we have From the…

Answered: In the same market as Question 2,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Economics: Industrial Economics Question: In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = A - B Q. The cost structure of firm 1 is given by C1(q1) = F1 + c1 q1 and that of firm 2 is given by C2(q2) = F2 + c2 q2. Prior to competing, the two firms can engage in research at levels (x1, x2) respectively in order to lower their marginal costs. As a result, marginal costs are c1 = c - x1 - β2x2 and c2= C - x2 - β1 X1. where β1 = β2 > ½. Finally, the research costs are F1 = a1 (x1)^2 /2 and F2 = a2 (x2)^2 /2, where a1 > 0 and a2> 0. 1. The Nash Equilibrium research levels are Choices: A. Higher than the cooperative research levels for both firms. B. Higher than cooperative research levels for firm 1 but lower for... C. Lower than the cooperative research levels for both firms. D. Higher than cooperative research levels for firm 2 but lower for... 2. An increase in the value of a2 would Choices: A.…
Compute the equilibrium prices, quantities, and profits for both firms. Consider now the first stage.
A firm in a purely competitive industry is currently producing 1,000 units per day at a total cost of $450. If the firm produced 800 units per day, its total cost would be $300, and if it produced 500 units per day, its total cost would be $275. What are the firm’s ATC per unit at these three levels of production? If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium? From what you know about these firms’ cost structures, what is the highest possible price per unit that could exist as the market price in long-run equilibrium? If that price ends up being the market price and if the normal rate of profit is 10 percent, then how big will each firm’s accounting profit per unit be?
In the Stackelberg model, the firm that sets output first has an advantage. Explain why using your own words.
2
Suppose that firms A and B have the same product in the same market, where Qd = Qa + Qb = 300 - 2p is demand And the firms have a simple cost curves of TCa = 5Qa and TCb = 10Qb Find Cournot Equilibrium & Find the Stackelberg equilibrium if A is the leader Thank you!
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7. Price and output in a competitive price-searcher market Consider a price-searching firm, Sean's Fire Engines, which sells fire engines in the fictional country of Pyrotania. Initially, Sean's produced eight fire engines but then decided to increase production to nine fire engines. The following graph shows the demand curve the firm faces. To sell the additional engine, Sean's must lower its price from $80,000 to $40,000 per engine. (Hint: Sean's Fire Engines gains revenue from the additional engine it sells, but it also loses revenue from the initial eight engines because it sells them all at the lower price.) On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $40,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $40,000. PRICE (Thousands of dollars per fire engine)…
HP and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix: If HP and Lenovo both set high prices, HP’s profit is $40 million and Sony’s profit is $35 million. If HP sets high price and Sony sets low price, HP’s profit is $25 million and Sony’s profit is $40 million. If HP sets low price and Sony sets high price, HP’s profit is $50 million and Sony’s profit is $10 million. If HP and Sony set low prices, HP has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? HP? If so, which one? If HP and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if HP and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Answer 4 and 4
Suppose that firms A and B have the same product in the same market, where Qd = Qa + Qb = 300 - 2p is demand And the firms have a simple cost curves of TCa = 5Qa and TCb = 10Qb Find Cournot Equilibrium & Find the Stackelberg equilibrium if A is the leader. Thanks!
am. 116.

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In the same market as Question 2, suppose Firm 2 does participate as a profit maximizer, and the firms reach Cournot equilibrium. How many units will Firm 1 be producing? 11