of: MC = 80 a. Find the Cournot equilibrium quantities for each firm. What is the Cournot equilibrium market price? b. Assuming that Plastergina is the Stackelberg leader, find the Stackelberg equilibrium quantities for each firm. What is the Stackelberg equilibrium price? c. Calculate and compare the profit of each firm under the Cournot and Stackelberg equilibria. Under which equilibrium is overall industry profit the greatest, and why?
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- Return to Figure 9.2. Suppose P0 is $10 and P1 is$11. Suppose a new firm with the same LRAC curve asthe incumbent tries to break into the market by selling4,000 units of output. Estimate from the graph what thenew firm’s average cost of producing output would be.If the incumbent continues to produce 6,000 units, howmuch output would the two firms supply to the market?Estimate what would happen to the market price as aresult of the supply of both the incumbent firm andthe new entrant. Approximately how much profit wouldeach firm earn?A large share of the world supply of diamondscomes from Russia and South Africa. Suppose thatthe marginal cost of mining diamonds is constant at$1,000 per diamond and the demand for diamonds isdescribed by the following schedule:Price Quantity$8,000 5,000 diamonds7,000 6,0006,000 7,0005,000 8,0004,000 9,0003,000 10,0002,000 11,0001,000 12,000a. If there were many suppliers of diamonds, whatwould be the price and quantity?b. If there were only one supplier of diamonds, whatwould be the price and quantity?c. If Russia and South Africa formed a cartel, whatwould be the price and quantity? If the countriessplit the market evenly, what would be SouthAfrica’s production and profit? What wouldhappen to South Africa’s profit if it increased itsproduction by 1,000 while Russia stuck to thecartel agreement?d. Use your answers to part (c) to explain why cartelagreements are often not successful.The soluation avilible I believe it is wrong so please solve it carefully Carl and Simon are the only sellers of pumpkins at the market, where the total demand function for pumpkins is q =3 ,200−1,600p. The total number of pumpkins sold at the market is q = qC + qS, where qC is the number that Carl sells, qS is the number that Simon sells. The cost of producing pumpkins for each farmer is $.50 per pumpkin; the fixed costs are zero. .a. Find the Cournot equilibrium price and quantities. .b. Find the Bertrand equilibrium price and quantities. . .c. Suppose now that every spring the snow thaws off of Carl’s pumpkin field a week before it thaws off of Simon’s. Therefore, Carl can plant his pumpkins one week earlier than Simon while predicting Simon’s choice based on the previous year information. Simon observes Carl’s choice and chooses how much pumpkin to plant. Find the new equilibrium price and quantities. .d. Compare the quantities and prices in parts a, b, and c. Rank these outcomes…
- usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…An economist was trying to understand the relation between price, Marginal Revenueand Marginal cost in Monopoly and Perfect Competition. Determine equilibrium priceand output in the long run under Monopoly and Perfect Competition if the marketdemand curve is given as QD=500-2P and Marginal cost is Rs 50. Also comment onthe values obtained in the case of Monopoly and Perfect CompetitionWould you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, What is the right amount of variety? Can there be too many varieties of shoes, for example?
- Kate and Alice are small-town ready-mix concrete duopolints. The market demand tunction is o- 20,000 - 200Pwhere Pis the price of a cubic yard of concrete and Ois the number of cubic yards demanded per year. Marginal cost is sa0 per cubic yard. Suppose Kate onters the market first and chooses her output belore Alice. What is the difference in Alice's profit when Kata enters the market tirst, compared to when they simultanecusly select ther outputa? When Kate entors the markat first, Alice's profit is $3,888.a0 lower. O When Kate enters the market fest, Alice's profit is 513,333.33 lower. O When Kate enters the market first, Alice's profit is $5,000 lower. O When Kate onters the market first, Alice's proft is $1.111.11 higher,Igrushka is a profit-maximizing firm producing wooden dolls-a capital-intensive good-which are sold in its home country, Russia, and abroad in France. Igrushka chose foreign production as a method of penetrating the French market and has to decide whether it is more efficient to directly invest in France to establish a production subsidiary or to license the technology to a French firm to produce its goods. On the following graph, AVCFrance is the average variable cost curve of a French firm producing wooden dolls. (This curve represents costs such as labor and materials.) The curve ATCSubsidiary represents the total unit costs Igrushka will face if it establishes a subsidiary in France. PER-UNIT COST (Dollars) 10 9 8 1 0 0 ATC 15 Subsidiary 30 45 60 75 90 105 120 PRODUCT (Thousands) AVC France 135 150 ? 4The BCY Corporation provides accounting services to a wide variety of customers, most ofwhom have had a business association with BCY for more than five years.BCY's demand is: P = 24,000 – 20Q, and BCY's marginal cost of service is: MC = 40Q.a. If BCY charges a uniform price for a unit of accounting service, Q, what price must itcharge per unit, and how many units must it produce per time period in order to maximizeprofit? Calculate the consumer surplus.b. If BCY could enforce first-degree price discrimination, what would be the lowest pricethat it would charge and how many units would it produce per time period?c. With perfect price discrimination and ignoring any fixed cost, what is total profit andwhat is the amount of consumer surplus?
- Tad's bait shop has a monopoly on the bait market at Sanderson's Lake. The demand curvefor bait is QD = 36 - 6P. Tad has two employees he can use to search for bait. The marginalcost of using Amanda to search for bait is: MCM (QM) = 0.5??. The marginal cost of usingAndrew to search for bait is: MCN(QN) =QNa. Determine how many units of bait each employee should gather.b. Which employee gathers more and why?c. What is the price Tad receives for selling the bait?A patent gave Sony a legal monopoly to produce a robot dog called Aibo. The Chihuahua-size pooch robot can sit, chase balls, dance, and play an electronic tune. When Sony started selling the toy in July 1999, it announced that it would sell 3,000 Aibo robots in Japan for about $2,000 each and a limited litter of in the United States for $2,500 each. Suppose that Sony's marginal cost of producing Aibos is $500.Its inverse demand curve is Pj= 3500−0.5Qj in Japan and Pa =4500−Qa Solve for the equilibrium prices and quantities (assuming that U.S. customers cannot buy robots from Japan). The equilibrium quantity in Japan is ____and the price, Pj is $____If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its marginal revenue curve will cut its marginal cost curve at a level of output than where its demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of output consistent with where its demand curve cut its marginal cost curve, the firm would be O O O O O D C O a. higher, productive efficient b. lower, resource-allocative efficient c. lower, minimizing costs d. lower, carning profits