Suppose that two firms produce a particular (homogeneous)product. The inverse demand function for the product is P = 100-Q. The firms have marginal cost equal to 10.(a) Derive the Cournot Nash equilibrium quantities, and thecorresponding price and profits. Show all work.(b) Suppose that the current price is the Cournot price youderived in part (a). Using the hypothetical monopolist test andassuming a 5% threshold for the test, does the good in questionrepresent an antitrust market? Show all work and explain youranswer. There are different ways to answer this question and anycorrect approach will be accepted.(c) Suppose more generally that marginal cost is equal to c. Forwhat values of c will this product represent an antitrust market?Show your work and explain your answer.Maximum size for new files: 400MBFiles

Answer- Given in the question- P = 100 -Q Q = Q1 + Q2 Q1 = Quantity of Firm 1 Q2 = Quantity of Firm…

Answered: Suppose that two firms produce a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The graph to the right represents the linear demand curve for each identical consumer in a market that a monopoly faces. Using nonlinear price discrimination analysis, suppose that the monopoly can make consumers a take-it-or-leave-it offer. Suppose the monopoly sets a price, p*, and a minimum quantity, Q*, that a consumer must pay to be able to purchase any units at all. What price and minimum quantity should it set to achieve the same outcome as it would if it perfectly price discriminated? The price should be $ and the minimum quantity is 100- 90- 80- 70- 60- 50- 40- 30- 20- 104 04 0 P, $ per unit 10 20 30 MR 40 50 60 70 Q. Units per dav 80 MC 90 100
The oligopolist increases the price of the good by 10% but the competitors did not follow the price increase. As a consequence, 15% of the consumers shifted to his competitors. As a result, his total revenue will increase. True False
The Incumbent operates in the market for good A. The Inverse demand function Is given by p= 110 - Q. Incumbent's total cost equals TC(q)=10q (a) Find the monopoly output and profit (b) A new firm with the same technology can enter the market by paying the setup cost F= 225. In this case, the firms will compete in the Stackelberg way: the Incumbent will set q1 and after that having observed q, the entrant will choose q2. Find the optimal output q1. (Hint: consider two cases: entry Istrategic entry deterrence.)
Suppose that a unique technology is developed that allowed for the production of lightsabers. The inspired entrepreneur (let's say, Lucas George) who developed the technology immediately slaps a patent on the design and hoards kyber crystals (necessary input). Demand and production costs are given below: P(Q) = 14,000 - 600Q C(Q) = 3,000 + 100² 1. How much profit does Lucas the monopolist earn? 2. Solve for the market failure of Lucas operating as a monopolist relative to what would be observed if Lucas operated as a competitive firm. Martin the Martian (not to be confused with any other martian that might be copyrighted...) observes the profits being made by Lucas. Determining that ray guns are not that different from lightsabers, Martin begins competing with Lucas: P'(Q) = 12,000 - 600Q' 3. A third potential business owner, Dr. When, has watched this market carefully and is trying to decide whether or not to market her Sonic Screwdriver (a near-substitute). Based on your previous…
In the Nash equilibrium of a Cournot game with two firms who have identical marginal costs, each firm chooses to produce half of the quantity that would be produced by a monopolist, given the same aggregate demand and marginal cost.(a) True. (b) False.
The inverse demand function in an industry with two firms is given as p = 50 – 2y, where y is the industry demand and p is the price. The firms have different technologies at their production plants with costs given as c(y1) = 10y, and c2[y2) = 14y2, where y = y,+ y2. 1. If the firms merge into one firm and become a monopoly in the industry, what will be the output of the merged firm? Comment on what would happen to the production plants under one ownership. Find the equilibrium price and profit. 2. Compare and comment on the total industry profits in these three market structures. 3. Assuming the firms are Bertrand duopolists, what is likely to happen? Explain verbally (no need to solve the problem).
All problems below include an “unknown” parameter A, which is 1.5. Suppose that 2 firms are competing in a heterogeneous market whereby the demand functions of firm 1 and firm 2 are given by q1 = A − 3p1 + 2p2 and q2 = A − 3p2 + 2p1. Both firms have a marginal cost equal to 1. (a) [10] Calculate the optimal profits for the two firms when they compete in prices. (b) [20] If firm 1 spends an amount F to reduce its marginal cost to 0, what is the maximum value of F that it would be willing to pay? For the rest of the problem, suppose, instead, that firm 1 sets the quantity (q1) while simultaneously firm 2 sets the price (p2). (c) [15] Draw the two best response functions in a graph and indicate the Nash equilibrium. Be as detailed as possible in giving intuition. (Note: the graphs will be in the (p2, q1) space, but remember that you are not drawing any demand curves.) (d) [25] Compute both of the firms’ equilibrium prices, quantities, and profits. Which firm makes a higher profit?…
Assume an oligopolist confronts two possible demand curves for its own output, as illustrated below. The first (A) prevails if other oligopolists don't match price changes. The second (B) prevails if rivals do match price changes. Price (dollars per unit) 19- 17 Demand B 15- Demand A 13- 11. 8 10 12 14 16 18 20 Quantity (units per period) (a) By how much does quantity demanded increase if price is reduced from $11 to $9 and Instructions: Enter your responses rounded to the nearest whole number. (i) Rivals match the price cut? (ii) Rivals don't match the price cut? (b) By how much does quantity demanded decrease when price is raised from $11 to $15 and Instructions: Enter your responses rounded to the nearest whole number (do not include negative signs). (i) Rivals match the price hike? (ii) Rivals don't match the price hike?
Suppose the market for a certain good is controlled by a single firm I (incumbent). Now, a second firm C (challenger) considers entering the market. In case of no entrance (ne), profits are TC = 0 and TI = 50 , respectively. In case of entry (e), firm I can either retaliate (r) which induces losses for both firms TC = T] = -10, or not retaliate (nr) which induces profits of TC respectively. 10 and TI = 20 (a) Depict this game in extensive form. (b) Find an equilibrium by backward induction. (c) Find all other equilibria (in pure and mixed strategies).
Hand written solutions are strictly prohibited
A monopolist has a constant marginal cost of £2 per unit and no fixed costs. He faces two separate markets in the United States and in the UK. The goods sold in one market are never resold in the other. He sets one price P1 for the US market and another price P2 for the UK market (both measured in £). The demand in the United States is given by Q1=7,000-700P1 and the demand in the UK is given by Q2=1,200-200P2. Calculate the profit maximising output produced and price charged in each country by the price-discriminating monopolist and comment in which country the price charged is higher and by how much.
A monopoly produces a good with a network externality at a constant marginal and average cost of c = $2. In the first period, its inverse demand curve is p 14-1Q. In the second period, its inverse demand curve is p=14-1Q unless it sells at least Q = 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (it sells a times as many units for any given price), so that its inverse demand curve is p=14- - 1/10. The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of a would the monopoly earn a higher two-period profit by setting a lower price in the first period? . (round your answer to two decimal places) If a is

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS