Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output) a. Determine the reaction function of each farmer. b. Find the cournot-Nash equilibrium. c. Calculate profit for each farmer d. Suppose that both farmers decide to form a cartel, determine profits for each farmer under the cartel. e. What output should farmer 1 produce if he/she expects their rival to produce 20 units? h. What if farmer 1 is a leader and farmer 2 a follower, determine the price, quantity and profits made by these two farmers
Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output)
a. Determine the reaction function of each farmer.
b. Find the cournot-Nash equilibrium.
c. Calculate profit for each farmer
d. Suppose that both farmers decide to form a cartel, determine profits for each farmer under the cartel.
e. What output should farmer 1 produce if he/she expects their rival to produce 20 units?
h. What if farmer 1 is a leader and farmer 2 a follower, determine the price, quantity and profits made by these two farmers
- please answers questions e, f and h
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