TB MC Qu. 09 - 92 Consider two firms competing... Consider two firms competing to sell a homogeneous product by setting price. The inverse demand curve is given by P = 6 - Q. If each firm's cost function is Ci(Qi ) = 2Qi, then each firm will symmetrically produce of output and Multiple Choice 2 units; profits of $2 2 units; profits of $0 4 earn units; profits of $2 4 units; profits of $0

TB MC Qu. 09 - 92 Consider two firms competing... Consider two firms competing to sell a homogeneous product by setting price. The inverse demand curve is given by P = 6 - Q. If each firm's cost function is Ci(Qi ) = 2Qi, then each firm will symmetrically produce of output and Multiple Choice 2 units; profits of $2 2 units; profits of $0 4 earn units; profits of $2 4 units; profits of $0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Canadian retail market for roasted whole coffee beans is dominated by two firms: Tim Hortons (T) and Kicking Horse (K). The market demand function is given by P(Q) = 64 – 0.5Q. Assume it is possible to produce partial units of output. • Kicking Horse's marginal cost for each kg of roasted coffee beans is $3. • Tim Horton's marginal cost for each kg of roasted coffee beans is $5 (although they've been around longer than Kicking Horse, they've only recently expanded their product line for consumers to brew their own coffee at home). What is the Cournot market equilibrium (P and Q)?
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Consider the differentiated goods Bertrand price competition model where firms A and B produce similar goods and sell them at pA and pB. The demand for each firm’s product is given byqA =60−2pA +pB andqB =60–2pB +pA ,and there are NO costs of producing either good (all costs are 0). (a)Calculate the (Bertrand) equilibrium prices and the net profits of each firm (b) Now suppose that -instead of competing to maximize their own individual profits- the firms decide to “collude” and set prices pA and pB to maximize their joint profits (sum of their profits). What would be each firm’s optimal price and net profits? Compare these prices and profits with what you found in (a) (greater/smaller/the same?).
Two firms sell substitutable products; the market price is: P = 90-Q, where Q Q₁ + Q2 is the total market quantity, which consists of Q1₁ (the quantity produced by Firm 1) and Q2 (the quantity produced by Firm 2). The firms choose their quantities simultaneously. Firm 1's costs are C₁ 6Q₁ + Q². Firm 2's costs are C₂ = Q². = O Which is the payoff function for Firm 2? O π₂ = 90Q₂ - 2 Which is the best response function for Firm 1? O π₂ = 90Q₂ - Q²². πT2 π₂ = 45 - Q² Q₁ Q₂₁ 2 O π₂ = 45 - 1²/20₁². Q₁ Q₁ 3 = 16. ²/Q²-Q₁2. = 32- 2- 1/1/202₂. 3 Q₁ = 45. Q1 = 40 + ²/Q₂₁ 2.2. = 10- -
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Two firms compete on price every year. The inverse demand function each firm faces depends on which firm has chosen the lowest price that year. The one that did captures the entire market. If, on the other hand, both prices are the same then they split the market evenly. Consumers round up prices to the nearest integer. For the firm with the lowest price p, demand is given by: q = 24-2p: Marginal costs are constant and equal to $4 for both firms. a. Define the Normal form of the stage game and determine the Nash Equilibria, the Cooperative Equilibrium and the Optimal Deviation from cooperation. b. For the once repeated (2 stages) game, determine if a Nash Equilibrium exists that improves on simply playing the (better) Nash Equilibrium of the stage game twice c. For the infinitely repeated game, determine what the interest rate would have to be to prevent the firms from cooperating. d*. Determine the relation between the interest rate and the number of punishment periods in a…
In the Cournot equilibirum, what is the market price and units produced by firm 1 and firm 2?
Economics: Industrial Economics Question: In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = A - B Q. The cost structure of firm 1 is given by C1(q1) = F1 + c1 q1 and that of firm 2 is given by C2(q2) = F2 + c2 q2. Prior to competing, the two firms can engage in research at levels (x1, x2) respectively in order to lower their marginal costs. As a result, marginal costs are c1 = c - x1 - β2x2 and c2= C - x2 - β1 X1. where β1 = β2 > ½. Finally, the research costs are F1 = a1 (x1)^2 /2 and F2 = a2 (x2)^2 /2, where a1 > 0 and a2> 0. 1. The Nash Equilibrium research levels are Choices: A. Higher than the cooperative research levels for both firms. B. Higher than cooperative research levels for firm 1 but lower for... C. Lower than the cooperative research levels for both firms. D. Higher than cooperative research levels for firm 2 but lower for... 2. An increase in the value of a2 would Choices: A.…
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Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities. Firm 1 has a constant marginal cost of 20. Firm 2 has a constant marginal cost of 80. Demand in the industry is given by D(p) = 380 - p. Let q1 and 92 denote the quantities of firm 1 and 2, respectively. Derive the Nash equilibrium in quantities. What is the total production in this industry?
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