Note:hand written solution should be avoided. The plastic industry is Argentina is dominated by two firmsPlastergina and Totopo. The market demand curve in theplastic industry is given by Q = 600 - 3p where Q is thequantity demanded per month, and p is the market price indollars. Firms in this industry supply quantities everymonth, and the resulting market price occurs at the point atwhich the quantity demanded equals the total amountsupplied. Each firm has an identical constant marginal costof: MC = 80 a. Find the Cournot equilibrium quantities foreach firm. What is the Cournot equilibrium market price? b.Assuming that Plastergina is the Stackelberg leader, findthe Stackelberg equilibrium quantities for each firm. Whatis the Stackelberg equilibrium price? c. Calculate andcompare the profit of each firm under the Cournot andStackelberg equilibria. Under which equilibrium is overallindustry profit the greatest, and why?

Demand curve shows the relationship between the price and quantity demand.Marginal cost refers to…

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?

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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Note:hand written solution should be avoided.

The plastic industry is Argentina is dominated by two firms
Plastergina and Totopo. The market demand curve in the
plastic industry is given by Q = 600 - 3p where Q is the
quantity demanded per month, and p is the market price in
dollars. Firms in this industry supply quantities every
month, and the resulting market price occurs at the point at
which the quantity demanded equals the total amount
supplied. Each firm has an identical constant marginal cost
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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Step 1: Demand curve and marginal cost

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Step 2: Equilibrium quantities and market price under Cournot equilibrium

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Step 3: Equilibrium quantities and market price under Stackelberg equilibrium

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Bags/Participants Fixed Cost Variable Cost Total Cost 0 $1,700 $ - $1,700 100 $1,700 $500 $2,200 200 $1,700 $1,200 $2,900 300 $1,700 $2,700 $4,400 400 $1,700 $5,200 $6,900 500 $1,700 $9,000 $10,700 600 $1,700 $15,000 $16,700 700 $1,700 $23,800 $25,500 800 $1,700 $36,800 $38,500 900 $1,700 $55,800 $57,500 1,000 $1,700 $83,000 $84,700 Given the above information on cost, if you charge $15 per entry, what is the breakeven quantity of bags that you should order? At what quantity of bags will profits be maximized? A Use the profit maximizing rule, MR ≥ MC, buy 300 bags. B Use the profit maximizing rule, MR ≥ MC, buy 200 bags. C Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 300. D Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 200.
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