Let ci be the constant marginal and average cost for firm i (so that firms may have different marginal costs). Suppose demand is given by P=1-Q.Calculate the Nash equilibrium quantities assuming there are two firms in a Cournot market. Also compute market output, market price, firm profits, industry prof- its, consumer surplus, and total welfare.Represent the Nash equilibrium on a best-response function diagram. Show how a reduction in firm 1’s cost would change the equilibrium. Draw a representative isoprofit for firm 1.

The Nash equilibrium is a concept in game ideas that represents a situation wherein every…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Let ci be the constant marginal and average cost for firm i (so that firms may have different marginal costs). Suppose demand is given by P=1-Q.

Calculate the Nash equilibrium quantities assuming there are two firms in a Cournot market. Also compute market output, market price, firm profits, industry prof- its, consumer surplus, and total welfare.
Represent the Nash equilibrium on a best-response function diagram. Show how a reduction in firm 1’s cost would change the equilibrium. Draw a representative isoprofit for firm 1.

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