two firms face the direct market demand curve given Q = 15-p, where Q = 9₁ +92 and q2 are the quantities of firm 1 and firm 2, respectively. Suppose firm 1's total cost is ( and firm 2's total cost function is C₂ = 2q2. Suppose that the two firms act independen choose their outputs simultaneously as in the Cournot model. Show the basis and briefly what is going on as you answer each of the following questions. Your mark will depend up correctness of your basis and explanation. 1. What is the equation of the demand curve faced by firm 1? What is the equation demand curve faced by firm 2? 2. Find the output reaction function of each firm. 3. Find the Nash-Cournot equilibrium quantity that each firm will produce. 4. At the Nash-Cournot equilibrium, at what price does each firm sell its output?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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1. Consider a market where there are only two firms that produce a homogeneous product. The
two firms face the direct market demand curve given Q = 15-p, where Q = 9₁ +92 and 9₁
and q2 are the quantities of firm 1 and firm 2, respectively. Suppose firm 1's total cost is C₁ = 9₁
and firm 2's total cost function is C₂ = 2q2. Suppose that the two firms act independently and
choose their outputs simultaneously as in the Cournot model. Show the basis and briefly explain
what is going on as you answer each of the following questions. Your mark will depend upon the
correctness of your basis and explanation.
1. What is the equation of the demand curve faced by firm 1? What is the equation of the
demand curve faced by firm 2?
Find the output reaction function of each firm.
2.
3. Find the Nash-Cournot equilibrium quantity that each firm will produce.
4. At the Nash-Cournot equilibrium, at what price does each firm sell its output?
5. Find the consumer surplus, producer surplus at the Cournot-Nash equilibrium
-
Transcribed Image Text:1. Consider a market where there are only two firms that produce a homogeneous product. The two firms face the direct market demand curve given Q = 15-p, where Q = 9₁ +92 and 9₁ and q2 are the quantities of firm 1 and firm 2, respectively. Suppose firm 1's total cost is C₁ = 9₁ and firm 2's total cost function is C₂ = 2q2. Suppose that the two firms act independently and choose their outputs simultaneously as in the Cournot model. Show the basis and briefly explain what is going on as you answer each of the following questions. Your mark will depend upon the correctness of your basis and explanation. 1. What is the equation of the demand curve faced by firm 1? What is the equation of the demand curve faced by firm 2? Find the output reaction function of each firm. 2. 3. Find the Nash-Cournot equilibrium quantity that each firm will produce. 4. At the Nash-Cournot equilibrium, at what price does each firm sell its output? 5. Find the consumer surplus, producer surplus at the Cournot-Nash equilibrium -
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