this question is one question with several parts **Duopoly Quantity Game**Seagate and Western Digital (WD) run a cartel producing identical 1 TB hard drives. The demand for hard drives is given by the equation: \[ Q = 17 - P \]Both companies have a marginal cost (MC) of 2 and no fixed costs, making the average total cost (ATC) also equal to 2.It is verified that together, the firms maximize their combined profit by each producing 3.75 hard drives.**Questions:**1. What profit does Seagate make with this cartel agreement? $____2. Is the cartel agreement a Nash equilibrium? - a. yes - b. no, Seagate wants to decrease production - c. no, Seagate wants to increase production - d. no, Seagate does not want to change production3. Suppose the cartel falls apart after the CEO of Seagate and the CFO of Western Digital get into a fight over whose homemade BBQ sauce tastes better. The companies are now very angry at each other and cannot cooperate. - Western Digital ends up producing 5 hard drives. What is Seagate’s best response? ____ hard drives. - (The answer is a whole number between 4 and 8, inclusive, so calculate Seagate’s profit for each option. A table and/or spreadsheet can be used to organize work.)

Answers (Ans-9) Let, Seagate = Firm 1 Western digital = Firm 2 Q = 17 – P MC = 2 = ATC Q…

s. The demand for hard drives is Q = 17 – P. They both have MC = 2 and no fixed cost so AT erified that together the firms maximize their (combined) profit by each making 3.75 hard profit does Seagate make with this cartel agreement? $ inued) Is the cartel agreement a Nash equilibrium? , Seagate wants to decrease production

s. The demand for hard drives is Q = 17 – P. They both have MC = 2 and no fixed cost so AT erified that together the firms maximize their (combined) profit by each making 3.75 hard profit does Seagate make with this cartel agreement? $ inued) Is the cartel agreement a Nash equilibrium? , Seagate wants to decrease production

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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