Two firms compete in a market to sell a homogeneous product with inverse demand function P-600-3Q Each firm produces at aconstant marginal cost of $300 and has no fixed costs. Use this information to compare the output levels and profits in settingscharacterized by Cournot, Stackelberg, Bertrand, and collusive behavior.Instruction: Do not round intermediate calculations. Round final answers to two decimal places for Cournot values.Cournot output for each firm25 OCournot profits for each firm: $ 3750Stackelberg leader output: 5625 OStackelberg follower output:Stackelberg leader profits: $Stackelberg follower profits: $Bertrand market-level outputBertrand profits for each firm: $Collusive market-level output:Collusive industry-level profits: $

Step 1:This question refers to analyze the strategic decision making steps and results of two…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PROBLEM IV. Consider an industry consisting of two firms (i = 1,2) that are engaged in a Bertrand price competition. The demand function for the product of firm i is given by qi = 24 – 9p; + 6p;. The marginal cost of production for each firm is zero. Q12. The collusive price of the products is (a) 4 (b) 5 (c) 1 (d) 6 (e) 2
8. Suppose there are two identical firms in an industry who compete by setting quantities. The output of firm 1 is denoted by q1 and that of firm 2 is denoted by 92. Each firm faces a constant marginal cost of 3. Let Q denote total output, 1.e. Qq1 +42. The inverse demand curve in the market is given by P-15-Q (a) Find the Cournot-Nash equilibrium quantity produced by each firm and the market price. (b) If the firms could collude, what would be the total output in the mar- ket? Assuming each firm produces half of the collusive output, what is the profit of each firm?
Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.
V1
21. In the industry, only two firms (Firm 1 and Firm 2) operate and they produce a homogenous good. They collude: they maximize their joint profit and split it equally between them. Firm I has the total cost of producing q; units of output given by the function TC(q)-8q1. The total cost of producing q: units of output for Firm 2 is TC(q)-q. Only integer quantities are allowed (no fractions). The market demand for the good is Q(P)-72-P, where Q is the quantity demanded and P is the unit price of the good. How many units of the good do cach firm produce in the equilibrium? A. Each firm produces 14 units. B. Firm I produces 32 units, and Firm 2 produces 2 units. C. Firm 1 produces 28 units, and Firm 2 produces 4 units. D. Each firm produces 16 units. E. None of the above
wo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model error_outlineHomework solutions you need when you need them. Subscribe now.arrow_forward Question Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA =…
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cost function is c(y) An industry has two firms. Firm 1's cost function is c(y) = 3y + 200 and firm 2's 3y + 100. The demand curve for the output of this industry is a downward-sloping straight line. In a Cournot equilibrium, where both firms produce positive amounts of output: = The firm with higher fixed costs produces more. Both firms produce the same amount of output. There is less output than there would be if the firms colluded to maximize joint profits. It is not possible to tell because the demand function is not specified. The firm with lower fixed costs produces more.
cost function is c(y) An industry has two firms. Firm 1's cost function is c(y) = 3y + 200 and firm 2's 3y + 100. The demand curve for the output of this industry is a downward-sloping straight line. In a Cournot equilibrium, where both firms produce positive amounts of output: = The firm with higher fixed costs produces more. Both firms produce the same amount of output. There is less output than there would be if the firms colluded to maximize joint profits. It is not possible to tell because the demand function is not specified. The firm with lower fixed costs produces more.
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Economics Consider a three-firm homogeneous product industry. The market demand function is X=1000-40P. The cost functions of the firms are: C1= 20X1, C2=13.5X2+0.075X22, and C3=16.3X3+0.005X32. Where, X=X1 + X2 + X3. 1. Explain the Firm's Cournot Behaviour. 2. Assuming the firms' practice on Cournot Behaviour, calculate the market price, outputs of the firms and their profits
The inverse demand for a homogeneous-product Stackelburg duopoly is P=24000-5Q. The cost structures for the leader and the follower respectively are CL(QL)=3000QL and CF(QF)=4000QF. a) What is the followers reaction function? b) Determine the equilibrium output level for both the leader and the follower. Leader output: Follower output: c) Determine the equilibrium markert price $ d) Determine the profits of the leader and the follower. Leader profits: $ Follower profits: $

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