Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10. The firms agreed to collude. But firm 1 sets a P-Duopoly. Instructions: Use no decimals. a. Under these conditions, P1 = $ P2 = $ b. Calculate each firm's equilibrium output. Q1 =  Q2 =  c. Calculate the profit each firm earns in equilibrium. Firm 1: $ Firm 2: $

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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  1. Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10. The firms agreed to collude. But firm 1 sets a P-Duopoly.

    Instructions: Use no decimals.

    a. Under these conditions,

    P1 = $

    P2 = $

    b. Calculate each firm's equilibrium output.

    Q1 = 

    Q2 = 

    c. Calculate the profit each firm earns in equilibrium.

    Firm 1: $

    Firm 2: $

     

    d. In this case, 

    A. Firm 1 was exposed to deception, and should have entered the market with P-Monopoly.

    B. Firm 2 was exposed to deception, and should have entered the market with P-Monopoly.

    C. Firm 2 was exposed to deception, and should have entered the market with P-Duopoly.

    D. Firm 1 was dishonest, and soon will be ostracized by the industry.

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