Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. 2. Cournot competitionConsider a town in which only two residents, Felix and Janet, own wells that produce water safe for drinking. Felix and Janet can pump and sell asmuch water as they want at no cost. Assume that outside water cannot be transported into the town for sale. The following questions will walk youthrough how to compute the Cournot quantity competition outcome for these duopolists.Consider the market demand curve for water and the marginal cost for collecting water on the following graph. Assume Felix believes that Janet isgoing to collect 8 gallons of water to sell.On the graph, use the purple points (diamond symbols) to plot the demand curve (D₁) Felix faces given Janet's water collection; then use the greypoints (star symbol) to plot the marginal revenue curve (MR₁) Felix faces. Finally, use the black point (plus symbol) to indicate the profit-maximizingprice and quantity (Profit Max 1) in this case.Note: Dashed drop lines will automatically extend to both axes.PRICE (Dollars per gallon)6.005.50PRICE (Dollars per gallon)5.004.504.003.503.002.502.001.501.000.5006.005.50JANET'S QUANTITY (Gallons of water)5.004.504.003.50Instead, now assume Felix believes that Janet is going to collect 12 gallons of water to sell, rather than 8.3.00On the following graph, use the purple points (diamond symbol) to plot the demand curve (D2) Felix faces in this case; then use the grey points (starsymbol) to plot the marginal revenue curve (MR2) Felix faces. Finally, use the black point (plus symbol) to indicate the profit-maximizing price andquantity (Profit Max 2) in this case.2.502.001.501.000.5002422201816141210Market DemandJanet's Water Production Felix's Water Production(Gallons of water)(Gallons of water)8128MC60 24204MCMarket Demand0 2Fill in the following table with the quantity of water Felix produces, given various production choices by Janet.6 8 10 12 14 1618QUANTITY (Gallons of water)Given the information in this table, use the green points (triangle symbol) to plot Felix's best-response function (BRF) on the following graph. SinceFelix and Janet face the same costs for producing water, Janet's best-response function is simply the reverse of Felix's; that is, the curve has the sameshape, but the horizontal and vertical intercept values are switched. Therefore, you can derive Janet's best-response function by following the sameanalysis as in the previous question, but from Janet's perspective. Use the purple points (diamond symbol) to plot her best-response function on thegraph. Finally, use the black point (plus symbol) to indicate the unique Nash equilibrium under Cournot quantity competition.?20 22 2440 26 8 10 12 14 16 18 20 22 24QUANTITY (Gallons of water)D₁MR1+Profit Max 14 6 8 10 12 14 16 18 20 22 24FELIX'S QUANTITY (Gallons of water)D₂MR2+(?)Profit Max 2Felix's BRF(?)Janet's BRF+Nash Equilibrium

Cournot competition describes how firms in an industry compete by choosing the quantity of output…

Janet's Water Production (Gallons of water) 8 12 Felix's Water Production (Gallons of water) Given the information in this table, use the green points (triangle symbol) to plot Felix's best-response function (BRF) on the following graph. Since Felix and Janet face the same costs for producing water, Janet's best-response function is simply the reverse of Felix's; that is, the curve has the same shape, but the horizontal and vertical intercept values are switched. Therefore, you can derive Janet's best-response function by following the same analysis as in the previous question, but from Janet's perspective. Use the purple points (diamond symbol) to plot her best-response function on the graph. Finally, use the black point (plus symbol) to indicate the unique Nash equilibrium under Cournot quantity competition.

Janet's Water Production (Gallons of water) 8 12 Felix's Water Production (Gallons of water) Given the information in this table, use the green points (triangle symbol) to plot Felix's best-response function (BRF) on the following graph. Since Felix and Janet face the same costs for producing water, Janet's best-response function is simply the reverse of Felix's; that is, the curve has the same shape, but the horizontal and vertical intercept values are switched. Therefore, you can derive Janet's best-response function by following the same analysis as in the previous question, but from Janet's perspective. Use the purple points (diamond symbol) to plot her best-response function on the graph. Finally, use the black point (plus symbol) to indicate the unique Nash equilibrium under Cournot quantity competition.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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