QUESTION 20 Firms A and B engage in Bertrand competition, where q4 = 26 – 2P, + 2Pg, 9, = 26 + 2PA – 2Pg,MC, = $2, MC, = $14 What is Firm B's price? $12 $8 $10 O $14
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- 3) You were recently chosen to be the new CEO of Rocket to the Moon, a company that contracts with NASA and many corporations to launch satellites. Your Business Intelligence Officer, whom you affectionately refer to as Rocketman, estimates that the worldwide market demand curve for rocket launches is Q = 25,000 P/20. Including Rocket to the Moon, there are a total of three firms in the rocket business, each with a marginal cost of $200K per rocket launch. Firms in the rocket business must build each rocket they launch from the ground up, so there is considerable effort put into forecasting market demand, as well as the actions of competitors. a. What model would best characterize the rocket business, Cournot or Bertrand? Why? b. What is the equilibrium price, quantity, and profits for each firm in the market, assuming it is characterized by Cournot competition? How does your answer change if you assume the market is better characterized by Bertrand's competition? In what follows,…Dear tutor, I would be glad if you solve this question with its detailed explanation. Thank you so much!!9. Two firms compete by choosing price. Their demand functions are q1 = 20 – pı + P2 and q2 = 20 – P2 + P1. Marginal costs are zero a) Suppose the two firms set their prices at the same time. Find the resulting NE. What 2 price will each firm charge, how much will it sell, and what will its profit be? b) Suppose Firm 1 sets its price first and then Firm 2 sets its price. What price will each firm charge, how much will it sell, and what will its profit be? c) Suppose there are three ways this game can be played: both firms set price at the same time; firm 1 sets its price first; firm 2 sets its price first. If firm 1 can choose among these options, which would it prefer?
- Q25.11. Consider the interaction between a retailer and a manufacturer. The manufacturer's marginal cost is 2 and it sets the price p in the first stage of the game. The retailer purchases the product from the manufacturer at this price (so the retailer treats p as its marginal cost) and sells the product at price r in the second stage of the game (this makes the retailer's profit function (r p)g). The market demand is q = 12 – 2r. What will be the prices set by the manufacturer and by the retailer?
- A producer of manure is located next to a bakery. The producer of manure produces M pounds of manure daily and earns profits of 156M - M². The bakery sells C' cakes daily, and it earns profits of 312C-C²-MC (the strong smell of manure drives away the appetite of many would-be customers of the bakery). In a competitive equilibrium solution, where each business seeks to maximize profits, a total of if be sold daily. From a social point of view, the producer of manure should not produce at all. Choose one: A. true B. false pounds of manure will3 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 12Please no written by hand solution
- Only typed answer2.- Each of two firms, firms 1 and 2, has a cost function C(q) = 1 2 q; 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 = 1 2. (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…Suppose that Firm 1 and Firm 2 are Stackelberg competitors in the market for popsicles. Firm 1 is the leader and Firm 2 is the follower. They have the same cost functions such that MC = 4. Market demand for popsicles is given by QD = 38 – 0.5P. Use this information to answer questions #1 and #2. 1. How many popsicles will Firm 1 produce in the SPE of this game? a. 91 6 b. q1 = 9 12 91 d. 91 с. 18 e. q1 = 36 %3D 2. If these firms were Cournot competitors, then compared to the outcome in #1 (Hint: No calculations necessary.) a. Firm 1 would earn more profit, and Firm 2 would earn less profit. b. Firm 1 would earn less profit, and firm 2 would earn more profit. c. Both firms would earn less profit. d. Both firms would earn more profit. The firms' profits would be the same, but industry-wide profit would be lower.
