Two firms compete by choosing theprice of their respective(horizontally differentiated)products. They both have averageand marginal costs equal to 1. Theirdemand functions are Q₁ = 6-3.5P1+P2 and Q2= 5+P₁ -P2. P1 and P2 arethe prices charged by each firm,respectively, and Q₁ and Q2 are theresulting demands. Suppose firm 1sets its price first and then firm 2sets its price. What price will firm 1charge?Select one:a. P1=3b. P₁ = 2c.P₁ = 4○ d.d.P₁=1.5

To find the price that Firm 1 will charge, we need to analyze this problem using game theory,…

Answered: Two firms compete by choosing the price…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that two firms are Cournot competitors. Industry demand is given by: P = 200 – q, - q, where q, is the output of Firm 1 and q, is the output of Firm 2. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. Solve for the Cournot price, quantity, and firm profits.
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QUESTION 1A) Two cournot competitors face inverse demand P = 50 - Q. Where, Q = q1+q2, is the total output of firms 1 and 2. What are the equilibrium output levels for q1 and q2, If firm 1 marginal cost is 1, and firm 2's marginal cost is 12? QUESTION 1B. Continuing with the inverse demand, P = 50 - Q, if each firm has a marginal cost of 0, what is the difference between the equilibrium price under Cournot competition and under Bertrand competition? b. C. d. a. The Cournot price is higher than the Bertrand price by 50. The Cournot price is lower than the Bertrand price by 25. The Cournot price is higher than the Bertrand price by 50/3. Equilibrium prices under Cournot and Bertrand are the same, so the difference is zero.
please help me with the last question. Thank you
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.…
The inverse market demand in a homogeneous-product Cournot duopoly is P = 100 – 2(Q1 + Q2) and costs are C1(Q1) = 20Q1 and C2(Q2) = 30Q2. a. What is the reaction function for each firm? b. What is each firm’s equilibrium output? c. What is the equilibrium market price? d. What is the profit each firm earns in equilibrium?
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?
If the inverse demand for bean sprouts were given by P(Y) = 430 − 2Y and the total cost of producing Y units for any firm were TC(Y) = 10Y and if the industry consisted of two Cournot duopolists, then in equilibrium each firm's production would be
a) Suppose that the two firms engage in Cournot competition. Find the equilibrium price PNE in the industry, the equilibrium outputs QANE and QBNE, as well as the profits πANE and πBNE, for each firm. b) Suppose the marginal cost for firm B increases from $20 to $140, while everything else remains unchanged. Find the new equilibrium price PNE in the industry, the new equilibrium outputs QANE and QBNE, as well as the new profits πANE and πBNE for each firm. c) Suppose that, in addition to the marginal cost increase from $20 to $140 from sub question b), firm B also has a fixed cost of $2500, out of which $2100 may be recouped if it shuts down; everything else remains unchanged. In this case, what will firm B’s optimal output be? (Justify your answer.) What will firm A’s profit be?
Obtain the Stackelberg equilibrium in which Walmart moves first. Compare with the Cournot equilibrium (equilibrium quantity is 2525 and equilibrium profit is 1625)
Consider Cournot competition with n identical firms. Suppose that the inverse demand function is linear with P(X) = a - bX, where X is total industry output, a; b > 0. Each firm has a linear cost function of the form C(x) = cx, where x stands for per firm output. It is assumed that a > c. a. At the symmetric equilibrium, what are the industry output and price levels? What are the equilibrium per firm output and profit levels? What is the equilibrium social welfare (defined as the difference between the area under the demand function and total cost)? b. Now let m out of n firms merge. Show that the merger is profitable for the m merged firms if and only if it involves a pre-merger market share of 80 percent. c. Show that each of the (n – m) non merged firms is better off after the merger. d. Show that the m-firm merger increases industry price and also lowers consumer welfare.

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