Question 1Suppose the romaine lettuce industry is a Cournot duopoly with the following two firms:Amalgamated Romaine (a) and Best Romaine (b). The (inverse) market demand schedule is:p = 262 -0.5QAmalgamated Romaine has the following cost structure:MCATC₁ = $6Best Romaine has a different cost structure:MC₁ = ATC₁ = $8Find the following in Cournot-Nash equilibrium.a. Output of Amalgamated Romaine =b. Output of Best Romaine =c. Cournot duopoly equilibrium price = $unitsunits3 pts

The objective of the question is to find the output of Amalgamated Romaine, the output of Best…

Answered: Question 1 Suppose the romaine lettuce…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40g. Assume that the demand curve for the industry is given by P= 160 - Q and that each firm expects the other to behave as a Cournot competitor. Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output level that maximizes its profits when taking its rival's output as given. What are the profits of each firm? (Round all quantities and dollar amounts to two decimal places.) When competing, each firm will produce 40 units of output. In turn, each firm will earn profit of $ 1600. What would be the equilibrium quantity if Texas Air had constant marginal and average costs of $10 and American had constant marginal and average costs of $40? If Texas Air had constant marginal and average costs of $10 and American had constant marginal and average costs of $40, American would produce units and Texas Air Corp. would…
1.6. Consider the Cournot duopoly model where inverse demand is P(Q) = a - Q but firms have asymmetric marginal costs: c₁ for firm 1 and c2 for firm 2. What is the Nash equilibrium if 0 a+c₁?
Consider the following Cournot Duopoly diagram... Firm 1 Reaction Function r₁ A 6 C 0 E no Isoprofit curves for firm 1 Firm 2 Reaction Function 1₂ At what point is the Cournot equilibrium achieved? Q₁
Assume that Acme and Gamma are the two main rivals in the market for hair dryers. Each firm is considering prices of $50 or $60, with the following possible profit outcomes: Gamma Price = 50 Price = 60 Price = 50 40, 45 45, 42 Acme Price = 60 24, 55 30, 48 A) Assume the firms choose prices simultaneously. Does the game have a solution? Explain. B) Is the solution you have identified a Nash Equilibrium? Explain why or why not.
Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 28q. Assume that the demand curve for the industry is given by P = 100 - Q and that each firm expects the other to behave as a Cournot competitor. Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output level that maximizes its profits when taking its rival's output as given. What are the profits of each firm? (Round all quantities and dollar amounts to two decimal places.) When competing, each firm will produce units of output.
A market has the following demand function: 1 P = 120 where Q, Σ0 a) Assuming Cournot-Nash market, fill in the table below when firm one has MC, = 10, firm two has MC, = 20 and firm three has MC, = 20. Additionally, there is no Fixed cost for none of the firms. b) Using data from the table below, explain the merger paradox when firms 2 and 3 merge. How the merged firm (firm 2 and 3) will be worse off? c) How would this outcome differ if all three firms merged? Industry level Output Number of Firm level Firms Price Profits Output Profits 1 3
Consider a standard Cournot oligopoly with n ≥ 2 identical firms, P(x) = a - bX, X ≥ 0, and C(x) = cx2. a. Find the Cournot equilibrium output and profit. b. If m firms wish to merge, what would be their cost function, assuming that they can use all their m production plants but that they otherwise do not have any eciency gains as a result of the merger? c. Given the cost function from part b, when is an m-firm merger profitable to the merged entity? To the non merging firms? d. Give a precise economic intuition explaining your answer relative to the usual (linear cost) case.
Three oligopolistic firms ("1", "2" and "3") conduct quantity competition in a certain market. The interactions between them take place as follows: firm 1 defines its production quantity, which is immediately observed by firms 2 and 3; then, firm 2 makes its decision on how much it will produce, and only after observing the decisions of firms 1 and 2 does firm 3 finally make its respective choice. Furthermore, the total costs of firms 1, 2 and 3 correspond respectively to c₁(q₁) = 10q₁, c₂(q₂) = 8q₂ and c₃(q₃) = 2q₃, and the firms face a (inverse) demand given by p(Q) = 110 - Q (where Q = q₁ + q₂ + q₃). Based on this information, determine what will be the total amount produced by the firms in the (single) ENPS for that game. (Note: the correct answer is an integer.)
At a busy intersection on Route 309 in Quakertown, Pennsylvania, the convenience store and gasoline station, Wawa, competes with the service and gasoline station, Fred's Sunoco. In the Nash-Bertrand equilibrium with product differentiation competition for gasoline sales, the demand for Wawa's gas is qw=740-400pw + 400ps and the demand for Fred's gas is as = 740-400ps + 400pw. Assume that the marginal cost of each gallon of gasoline is m = $6. The gasoline retailers simultaneously set their prices. What is the Bertrand-Nash equilibrium? The Bertrand-Nash equilibrium is where pw = $ 7.85 and Ps =$7.85. (Enter your responses rounded to two decimal places.) Suppose that for each gallon of gasoline sold, Wawa earns a profit of $1.00 from its sale of salty snacks to its gasoline customers. Fred sells no products that are related to the consumption of his gasoline. What is the Nash equilibrium? The Bertrand-Nash equilibrium is where Pw = $ and Ps = $ (Enter your responses rounded to…
Question 22 Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100-P, where is the total quantity produced. Firm 1's marginal cost is MC1 = 91. Firm 2's marginal cost of production is MCH = 4 with probability 0.25 and MC₂ = 2 with probability 0.75. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the market clearing price? 41/2 215/4 167/4 if the cost is high and 155/4 if the cost is low 167/4 if the cost is high and 163/4 if the cost is low
Part 2: First Long Question There are two French bakeries in a small town: Le Meilleur Croissant (C), owned by Camille, and Le Meilleur Pain Au Chocolat (P), owned by Paul. In each period of an infinitely repeated game, they compete a la Bertrand, with market demand given by Q(pmin) = 10 - Pmin- Even though they sell identical goods, they have different marginal costs: cc = 2 and %3D Cp = 4 (Paul bakes just as well but is bad at business decisions). There are no fixed costs. Question 6 Turns out that Camille and Paul are married, and so they choose prices to maximize the joint profits of the two firms. Because both love baking and love each other, they also jointly decide that both firms should be selling positive amounts in their optimal plan. What prices do they choose? Pc = 6, pp = 11 Pc = 6.5, pp = 6.5 Pc = 6, pp = 6 Pc = 7, pp = 7 %3D O pc = 6, pp = 7
Consider Atlanta as an oligopoly market with five airlines that behave in a Cournot Model fashion. The Atlanta market demand schedule is:P = 580 - 1.5*Q.The Cost schedule for Delta is:MC=AC=Scomp=110.The Cost schedule for the other four firms (United, Southwest, et al) is:MC=AC=Scomp=90.What is the Cournot Market Price

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