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1. Fred and Barney are fishermen who operate fishing ships out of Nantucket. They own similar ships that can each carry a day
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Answer #1
  1. P = 16 – 0.1Q

a)

P = 16 – 0.1(qF +qB)

Residual demand for Fred:

P = (16 – 0.1qF) – 0.1qB

(b)

Fred’s Profit:

πF = P*qF – MC*qF

πF = ((16 – 0.1qF) – 0.1qB)qF – 4qF

πF = 12qF – 0.1qF^2 – 0.1qBqF

(c) Best response function can be found out by differentiating πF wrt qF:

d πF/dqF = 12 – 0.1*2qF – 0.1qB

Equating to zero:

12 – 0.2qF – 0.1qB = 0

qF = (12 – 0.1qB)/0.2

qF = 60 – 0.5qB

(d) Barry’s Residual demand curve:

P = 16 – 0.1(qF +qB)

Residual demand for Fred:

P = (16 – 0.1qB) – 0.1qF

(e)

Fred’s Profit:

πF = P*qB – MC*qB

πF = ((16 – 0.1qB) – 0.1qF)qB – 4qF

πF = 12qB – 0.1qB^2 – 0.1qBqF

Hi. Please try to post subparts in lot of four.

Thank you!

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