QUESTION 16 Firms A and B engage in Stackelberg competition, where p = 90 – 40. MC. = S10. MC. = $26: Firm A is the Stackelberg leader. What is the market price? O $18 $42 O $34 O $50
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![Economics
QUESTION 16
Firms A and B engage in Stackelberg competition, where p = 90 – 40 MC. = S10o MC. = $26: Firm A is the Stackelberg leader. What is the market price?
O $18
O $42
O $34
O $50](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc3bf7a77-2fae-44a1-a151-f0dd6648bc85%2F2d1b39d2-cde8-47f1-8ed8-498c8d4134d3%2Fepw9bgr_processed.jpeg&w=3840&q=75)
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- A market with N=20 identical firms compete on quantity (Cournot competition). The market price elasticity of demand is = −1.5, and the price elasticity of supply for N-1 of the firms is n-i = 1.5. What is the price elasticity of the residual demand curve facing firm i? O -30 O -50 O -58.5 O -602.- Each of two firms, firms 1 and 2, has a cost function C(q) = 0.5q; the demand function for the firms' output is Q = 1.5 - p, where Q is the total output. Firms compete in prices. That is, firms choose simultaneously what price they charge. Consumers will buy from the firm offering the lowest price. In case of tying, firms split equally the demand at the (common) price. The firm that charges the higher price sells nothing. (Bertrand model.) (a) Formally argue that there could be no equilibrium in prices other than p1 = p2 = 0.5 (b) Solve the same problem, but this time assuming that firms compete in quantities.Now, suppose that firm 1 has a capacity constraint of 1/3. That is, no matter what demand it gets, it can serve at most 1/3 units. Suppose that these units are served to the consumers who are willing to pay the most. Thus, even if it sets a price above that of firm 1, firm 2 may be able to sell some output. (c) Obtain the (residual) demand of firm 2 (as a function of its own…250 225 Revenue Lost 200 175 150 Revenue Gained 125 Demand 100 75 50 25 3 4 7 8 9. 10 QUANTITY (Fire engines) Gilberto increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. O True O False acer Σ 2. 1. PRICE (Thousands of dollars per fire engine)
- Industrlal Economics A market is characterised by an inverse demand curve p 6- 20 where Qis total quantity. Two firms, A and 8, are competing à la Cournot and TCA(ga) = 2qaand TCe(ge) = q Firms profts are equal to: o a) A = and a = (b) = and ন = O (o T = and T- O () - 1 and i - 4 SuccessivoIn India, Cisco’s market share of the Ethernet switch and router market is approximately 67 percent. Juniper and HP each have market shares of about 6.5 percent, and several other firms have somewhat smaller market shares. Draw a diagram showing the equilibrium in this dominant firm market. Identify the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms. Illustrate what happens to the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms if additional fringe firms enter the marketThe information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract. Quantity 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 Price 60 55 50 45 40 35 30 25 b. Refer to Table 17-36. Suppose these 2 firms are price competing with each other (as what happens in a perfectly competitive market). What would total output be? a. 0 21250 1200
- Homework (Ch 14) 1. There must be many buyers and sellers-a few players can't dominate the market. 2. Firms must produce an identical product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for th problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed. Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store.…Consider two firms in a competitive market. The following table shows the marginal costs of the two firms. Marginal Cost ($) Output Firm 1 1 5 2 3 4 5 6 7 8 a. 11.5; 12.0 O b. 10.5; 11.5 c. 11.0; 11.5 d. 12.0; 14.0 e. 12.0; 12.5 6 Check 8 9 11 12 14 15 Firm 2 5.5 6.5 7.5 8.5 9.5 10.5 11.5 If the equilibrium price falls strictly between $[ Answer01] and $[ Answer02 ], the two firms will produce a total of 12 units and the allocation of production will be efficient. 12.53 In a Cournot market with two firms, the inverse market demand curve is P=50-2Q, where Q=q1+q2(Firm 1’s output is ; Firm 2’s output is ). Both firms have a constant marginal cost of 14. If Firm 2 produces 12 units of output, how much should Firm 1 produce? Group of answer choices 3 6 0 12
- QUESTION 5 Consider the Cournot model of quantity competition. In the Nash equilibrium, firms always end up producing more than a monopolist would produce. O True O Falseusiness 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…Consider a duopoly market with 2 firms. Aggregate demand in this market is given byt Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MC = 20, i=A,B. « Assume the firms compete a la Cournot. e a) Find the inverse demand in this market. Note that marginal revenue for both firms is given by MRA=500-2QA-QB, MRB=500-QA-2QB. b) Describe what a best-response curve is and how to find it. c) Derive the best-response function for each firm. d) What are the equilibrium quantities? e) What is the total quantity supplied on this market? f) What is the equilibrium price in this market?
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