they share the market equally. Costs are given by (g) = 16g. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses p₁= 25. Firm 2's best response is to set what price? 24 b) If Firm 2 chooses the price determined in the previous question. Firm 1's best response is to choose what price? 23 If Firm 1 chooses P₁ = 12. Firm 2's best response is a range of prices. What is the lowest price in this range? 16 5) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 34 units, and Firm 2 can produce at most 42 units. If firms set different prices, consumers will first buy from the firm charging the lower price. Once that firm's supply is exhausted, consumers will buy from the firm charging the higher price until that firm's supply is exhausted. What is Firm 1's equilibrium profit? 816

they share the market equally. Costs are given by (g) = 16g. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses p₁= 25. Firm 2's best response is to set what price? 24 b) If Firm 2 chooses the price determined in the previous question. Firm 1's best response is to choose what price? 23 If Firm 1 chooses P₁ = 12. Firm 2's best response is a range of prices. What is the lowest price in this range? 16 5) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 34 units, and Firm 2 can produce at most 42 units. If firms set different prices, consumers will first buy from the firm charging the lower price. Once that firm's supply is exhausted, consumers will buy from the firm charging the higher price until that firm's supply is exhausted. What is Firm 1's equilibrium profit? 816

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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option d