Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60- C marginal cost for each firm is €24. What price should Firm 1 charge at the Cournot equilibrium?

Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60- C marginal cost for each firm is €24. What price should Firm 1 charge at the Cournot equilibrium?

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 there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60 – Q. The marginal cost for each firm is €30. What price should Firm 2 charge at the Cournot equilibrium
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Suppose the inverse market demand for manufactures is P(Q) = A – Q, where P and Q denoteprice and total goods produced and the parameter A denotes the size of the domestic market.Suppose any firm has a cost function, c(q) = cq, where A > c. Suppose there are two firm in themarket which produce q1 and q2, where Q = q1 + q2.a. Solve for the Cournot equilibrium levels of output (Q*), price (P*) and markups.b. What is the impact of an increase in market size, A, on Q*, P* and markups when there are twofirms? Provide some intuition for these predictions.c. Suppose a third firm enters so that Q = q1 + q2 + q3. What is the impact of entry on Q*, P* andmarkups? And why? Explanation and math work for all three parts please!!
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