PA #1: Africa Apricots & The Apricot ValleyTwo apricot orchards African Apricots and The Apricot Valley sell seasonal apricots to the market. Assume that those apricots are both grown using the same organic practices in the neighboring orchards and do not differ in taste, size, color, or any other characteristics.The market demand is described by the following function: P=AB-Q. P is the price given per one bushel of apricots (a variable), Q is the quantity demanded at each price (a variable). Assume that both orchards have marginal costs that equal C $/bushel. A=1, B=9, and C=3 are the integer numbers given to you. 1.1. Write down the Demand function substituting A, B, and C with the given integer numbers. 1.2. Utilize the Cournot Model and find the Cournot-Nash Equilibrium for this oligopoly market. Demonstrate your algebraic solution. 1.3. Graph the best-response-function (reaction function) diagram for the companies. Demonstrate how you calculated the numbers that represent the intersection points of the graphs with both axes. Show the Cournot-Nash Equilibrium on this diagram. 1.4. Based on the Cournot Model, calculate profits of Africa Apricots and The Apricot Valley, and the industry profit for this oligopoly market. 1.5. Calculate profits of Africa Apricots and The Apricot Valley, and the industry profit assumed for perfect competition and monopoly. 1.6. Draw a graph that demonstrates the demand curve and three prices and quantities. Compare the results assumed for oligopoly, perfect competition, and monopoly. Make a short conclusion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PA #1: Africa Apricots & The Apricot ValleyTwo apricot orchards African Apricots and The Apricot Valley sell seasonal apricots to the market. Assume that those apricots are both grown using the same organic practices in the neighboring orchards and do not differ in taste, size, color, or any other characteristics.The market demand is described by the following function: P=AB-Q. P is the price given per one bushel of apricots (a variable), Q is the quantity demanded at each price (a variable). Assume that both orchards have marginal costs that equal C $/bushel. A=1, B=9, and C=3 are the integer numbers given to you. 1.1. Write down the Demand function substituting A, B, and C with the given integer numbers. 1.2. Utilize the Cournot Model and find the Cournot-Nash Equilibrium for this oligopoly market. Demonstrate your algebraic solution. 1.3. Graph the best-response-function (reaction function) diagram for the companies. Demonstrate how you calculated the numbers that represent the intersection points of the graphs with both axes. Show the Cournot-Nash Equilibrium on this diagram. 1.4. Based on the Cournot Model, calculate profits of Africa Apricots and The Apricot Valley, and the industry profit for this oligopoly market. 1.5. Calculate profits of Africa Apricots and The Apricot Valley, and the industry profit assumed for perfect competition and monopoly. 1.6. Draw a graph that demonstrates the demand curve and three prices and quantities. Compare the results assumed for oligopoly, perfect competition, and monopoly. Make a short conclusion.

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