Tom is a monopolist input supplier to Dick and Harry. Tom's marginal cost is 1. Dick and Harry are duopolists with production function q x2 No firm has fixed costs. The demand for the final product is given by Q= 100-p. %3D a) Assume Dick and Harry buy the input from Tom at price k. What are their cost functions? b) Find the Cournot equilibrium quantities. c) What price, k, should Tom set? d) Now suppose Dick could buy Tom's firm and stop supplies of the input to Harry so that Dick would be a monopolist. How much is Dick willing to pay for Tom's firm?

Tom is a monopolist input supplier to Dick and Harry. Tom's marginal cost is 1. Dick and Harry are duopolists with production function q x2 No firm has fixed costs. The demand for the final product is given by Q= 100-p. %3D a) Assume Dick and Harry buy the input from Tom at price k. What are their cost functions? b) Find the Cournot equilibrium quantities. c) What price, k, should Tom set? d) Now suppose Dick could buy Tom's firm and stop supplies of the input to Harry so that Dick would be a monopolist. How much is Dick willing to pay for Tom's firm?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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