Hand written solutions are strictly prohibited. 7. Consider a two-stage competition between two firms.The total market demand curve is givenas P = 36- Q, where Q = Q1 + Q2. (The Qs here stand forquantity, and they are the ys in yourtextbook in the relevant chapters.) Both firms have aconstant marginal cost 18 and zero fixedcost. Firm 1 will pick its output level in stage 1 and Firm 2will pick in stage 2. How many unitsdoes each firm produce in equilibrium? What is the profitlevel?

Stackelberg model is a form of monopolistically competitive market in which there are 2 competitive…

Answered: will pick in stage 2. How many units…

Business

Economics

will pick in stage 2. How many units does each firm produce in equilibrium? What is the profit level?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

See similar textbooks

Related questions

Q: Suppose demand and supply are given by Qd= 14 - P/2 and Qs = P/4 - 1 a. Determine the equilibrium…

A: The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve. The…

Q: Buyer Willingness To Sell Andre $50.00 Rafi $30.00 Ruxin $20.00 Taco $10.00 If the price of the good…

A: The price at that a producer is willing to sell an item and the price at which the item is actually…

Q: Chapter 04 Problems & Applications Because begels and cream cheese are often eaten together, they…

A: Complementary goods, also known as complementary products or complements, are items or services that…

Q: Grizz, OU's mascot, wants to increase his earnings. He decides it might be profitable to occupy one…

A: Elasticity of demand, often referred to as price elasticity of demand (PED), is a measure of how…

Q: Assume a competitive firm faces a market price of $100, a cost curve of: C=0.002q³+50q+750, MC =…

A: The market price is given as $100The cost curve is given The marginal cost is given as

Q: 3-56 The local garbage company charges $6 a month A for garbage collection. It had been their…

A: Household waste or rubbish is called garbage. Garbage consists of leftover food, fruit, vegetable…

Q: Price B * MC-S MR Q₁1 Q₂ Q Quantity ATC DemandMarket A firm seeks to maximize total revenue. At what…

A: The Monopoly refers to market where only single firm exists in the market. Monopoly firm can earn…

Q: The following graph shows the loanable funds market in the United States. It plots both the demand…

A: A budget surplus happens when income more than expenditures. The term often refers to a government's…

Q: Part 1-Check for Understanding-Use the graph below which shows a competitive market that is subject…

A: Equilibrium refer to the situation where both demand and supply curve intersect each other.Dear…

Q: A rise in the price of a smoothie from $2 to $3 results in a decrease in the quantity of smoothies…

A: Elasticity of demand refers to change in demand due to change in price. It is sensitiveness of…

Q: The price of SUVs, a substitute-in-production for sedans, has increased over the last year. Show the…

A: Demand refers to the quantity of goods and services demanded by the consumer at a point in time.…

Q: Rue operates a food truck on Florida beaches, where she sells paninis and drinks, which she can sell…

A: A budget is a financial plan that outlines an organization's or individual's expected income and…

Q: Table 3-2 Farmer Rancher Labour hours needed to make 1 kilogram: Meat C. 4 4 Potatoes 6 Kilograms…

A: Opportunity cost is the next best alternative.Opportunity cost shows the forgone units of one good…

Q: National Bank of Guerneville has $ million in excess reserves.

A: National Bank of Guerneville checkable deposit = $36 million. National Bank of Guerneville reserves…

Q: 9 - 4x The above equation implies that if the price is increased by $1, the demand is expected to a.…

A: Demand equation describes a relationship between the price and quantity demanded.It shows the…

Q: Use the following general linear supply function: Qs 40+6P-8P/+10F = where Qe is the quantity…

A: The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve. The…

Q: Output per hourProduction and Production Estonia Morocco of work Swords 5 2 Belts 3 2 Consumption…

A: Opportunity cost refers to decrease in production of one good required to increase the production of…

Q: 6. Producer surplus and price changes The following graph plots a supply curve (orange line) for a…

A: Producer surplus is the area below price and above supply curve. The higher the price , higher will…

Q: In 1880, five aboriginal trackers were each promised the equivalent of 50 Australian dollars for…

A: A bounty typically refers to a reward or payment offered for the completion of a specific task, job,…

Q: Given the production function: 10X+0.7X2-0.005X3, what is the yield (output) at maximum output O…

A: The study and evaluation of corporate financial concerns using abstract economic concepts and ideas…

Q: The demand function for football tickets for a typical game at OSU is D(p)-200,000-10,000p. OSU has…

A: Marginal Revenue: Marginal revenue is the additional revenue generated by selling one more unit of a…

Q: An economist estimated that the cost function of a single-product firm in a perfectly competitive…

A: A perfectly competitive market is characterized by a multitude of small firms that lack the ability…

Q: The following graph shows a consumer's price-consumption curve. From the information on the figure…

A: As we can see from above graph, there is a rotation of budget line towards right. This happens due…

Q: K Match each diagram below with its description. Assume that the economy is producing or attempting…

A: The production possibility frontier (PPF) refers to the curve which shows all the possible…

Q: An economist estimated that the cost function of a single-product firm in a perfectly competitive…

A: A perfectly competitive market is characterized by a multitude of small firms that lack the ability…

Q: The value of the coefficient is therefore this good has a relatively price. decrease) price to…

A: Elasticity is a measure of the responsiveness of one economic variable to a change in another…

Q: For the cash flows shown in the diagram, determine the value of x and 2x that will make the future…

A: Cash flow refers to the movement of money in and out of a business, investment, or individual's…

Q: In 1988 the value of RGDP was $12.31 trillion and the population was 256.78million. What was the…

A: Real Gross Domestic product(RGDP): The total value of all goods and services produced in a country,…

Q: *Use the graph to answer Questions Q7 through Q18. The graph represents the market situation that a…

A: Monopoly : A monopoly describes a market situation where one company owns all the market share and…

Q: The figure below graphs log GDP for periods t = 1, t = 2, t = 3, t = 4, and t = 5. log GDP log 115.…

A: GDP stands for Gross Domestic Product, and it is a key economic indicator that measures the total…

Q: Richard (a Zimbabwean) builds a house in South Africa during 2019 and sells it the same year. When…

A: The sale of the house in South Africa is a domestic transaction, so it will be included in the GDP…

Q: Based on this model, firms earn revenue when Suppose Crystal earns $650 per week working as a…

A: The circular flow model describes the movement of money, goods, and services within an economy.…

Q: A cash-starved town decides to impose a $6 excise tax on t-shirts sold. The following table shows…

A: The only price at which consumer and producer plans coincide is the equilibrium price, which is…

Q: The following graph plots the supply and demand curves in the market for VR headsets Use the black…

A: The demand curve is a downward-sloping curve. The supply curve is an upward-sloping curve. The…

Q: 1. US Mkt. for American cars. Assume that the current strike affecting Detroit's Big Three…

A: This can be described as the concept that shows the graphical representation of which combination of…

Q: Given a demand curve of P = 147 - 1Qd and supply of P = 51 +3Qs, please calculate consumer surplus,…

A: The consumer surplus is the gap between the maximum price a consumer is willing to pay and actual…

Q: 8) The cross-price elasticity of demand for peanut expect the price of jelly to decline by 15%, what…

A: Cross price elasticity of demand for good A w.r.t price of B measured the percentage change in…

Q: Graph #1 Inflation Rate (%) 8 7 9 4 3 2

A: The Phillips curve is a graph that shows the relationship between the unemployment rate and the…

Q: Calculate the present value of the cash flow shown below. Interest rates are 10.00% per year,…

A: The time value of money states tha an amount of money is worth more presently compared to the same…

Question

Hand written solutions are strictly prohibited.

7. Consider a two-stage competition between two firms.
The total market demand curve is given
as P = 36- Q, where Q = Q1 + Q2. (The Qs here stand for
quantity, and they are the ys in your
textbook in the relevant chapters.) Both firms have a
constant marginal cost 18 and zero fixed
cost. Firm 1 will pick its output level in stage 1 and Firm 2
will pick in stage 2. How many units
does each firm produce in equilibrium? What is the profit
level?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Stackelberg model

VIEW

Step 2: Deriving the best response strategy for firm 2

VIEW

Step 3: Calculating profits of each firm

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Two firms facing a demand curve are P = 50 -5Qwhere Q = Q1 + Q2. The cost functions of the two firms are:C1(Q1) = 20 + 10Q1C2(C2) = 10 + 12Q2Based on this information:a. Suppose both companies have entered the industry, then what is the price?and the profit-maximizing amount for the two firms under conditionsperfectly competitive market?b. What is the quantity, price and profit of the two firms ifcompanies collude in pricing?c. What are the quantities, prices, and profits of the two firms if theydo the Cournot strategy, and draw the reaction curves of the twothe company?d. What are the quantity, price, and profit of the two firms if theycarry out the stakeberg strategy.
Please no written by hand solution Considerthe following problem. There are five firms producing a homogenous good and competing in quantities simultaneously. The demand function for this good is given by D(p) = 100−p, where p denotes price. The marginal cost is the same for all firms and equals 40 Answer the following questions. (a) Compute the equilibrium quantities and profits of each firm. (b) Now suppose that two of these firms (say firms 1 and 2) want to merge. (The remaining firms stay unchanged.) Merging, however, is costly. To merge, each merging firm has to pay a fixed cost F. Determine the highest fixed cost F that the two firms would be willing to pay in order to proceed with the merger.
3
2. An industry contains two firms and the inverse demand function for the firms' output is P-180-30, where Q is the total output Suppose that firm I's cost and marginal cost functions are C(q)- 30q; and MC(q)-30, while firm 2's cost and marginal cost functions are C(q)-q² and MC(q)-2q2 a. Determine each firm's Nash equilibrium output. b. Determine each firm's profit at the Nash equilibrium output.
Im a bit confused on how start solving could I have some help
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
7. A honey farm is located next to an apple orchard and each acts as a competitive firm. Let the number of apples produced be measured by A and the amount of honey produced by H. The cost functions of the two firms are CH (H) = H²/100 and C₁(A)=4-H. The price of honey is £2 and the price of apples is £3. 100 a. If the firms operate independently, what is the equilibrium number of apples and amount of honey produced? Are these amounts the Pareto-efficient? Explain. b. Suppose the two firms merge. What is the profit maximising amount of apples and honey that the merged firm produce? Explain. c. What is the socially optimum amount of honey and apples? Discuss methods to induce the independent firms to produce the socially optimal number of apples and amount of honey. Explain.
300 270 240 210 180 150 120 90 60 30 0 20 MC 32 40 50 60 70 80 The figure shows MC, MR and ATC curves for Joe's Good Enough Cafeteria, a firm that operates in a competitive market. If the firm is producing 50 units of output, increasing output by one unit would the firm's profit by $ Joe's SHORT RUN equilibrium quantity is equal to ATC Joe's LONG RUN equilibrium quantity will be MR If the firm is producing 70 units of output, increasing output by one unit would the firm's profit by $ and profit is $ and profit will be $
2.- Each of two firms, firms 1 and 2, has a cost function C(q) = 0.5q; the demand function for the firms' output is Q = 1.5 - p, where Q is the total output. Firms compete in prices. That is, firms choose simultaneously what price they charge. Consumers will buy from the firm offering the lowest price. In case of tying, firms split equally the demand at the (common) price. The firm that charges the higher price sells nothing. (Bertrand model.) (a) Formally argue that there could be no equilibrium in prices other than p1 = p2 = 0.5 (b) Solve the same problem, but this time assuming that firms compete in quantities.Now, suppose that firm 1 has a capacity constraint of 1/3. That is, no matter what demand it gets, it can serve at most 1/3 units. Suppose that these units are served to the consumers who are willing to pay the most. Thus, even if it sets a price above that of firm 1, firm 2 may be able to sell some output. (c) Obtain the (residual) demand of firm 2 (as a function of its own…
4
Pls help with below homework, pls solve all parts
WEBCAM RECORDING Industrial Economics da 6 A market is characterised by an inverse demand curve p =8 – 2Q where Q is total quantity. Two firms, A and B, are competing à la Cournot and TCA(qA) = 29A and TCB(qB) = q ta non %3D data Total profits n (1.e. the sum of profit for the two firms) are equal to: ggio max. ontrassegna O (a)n = nda %3D O (b) = 16 O (c)N = 4 O (d) = 9 Precedente Successivo