Question

Firm 1 moves first and chooses its quantity. Firm 2 moves second and decides whether to enter on not. If it enters it pays a fixed cost of F=225. If it enters it then chooses its quantity. Both firms have MC=60. Market demand is p=100-x. What is the market quantity? Enter a number only (round to 2 decimal places). Numeric Answer:

Answer 1

1- Leadis 2 - Follower F=225 - mc=60 P = 100-X whue x is total output _X = X,+x2 - Leady Fellowes output output = Revenue - Cost I P. 42 - (225 + 60 X2) = 1100 - X.-X1) X2 - 225 – 60X2 2720 dX 10o-X, -28z - 600 - 100 - X; - 60 X2 - 2 now, Fol Firm I 7 - P. x, - 608, = 600 - XL-X2.) X, - 60 X1 1100 - X - 100 + X1 + 30 2 2 Oxy - floo - X1 – 20144 - 60X7 Scanned, with Camom

2 T - oxi 100 - X1 - 20-60=0 - - XH = 20 Xo = 100-X, -60 To = 20 2 X = alo X: +X2 30 Scanned with CamScanner nneth _

100-2X=60

Note that when X=30 , P = 70 1 = Revenue - Cost = 70 X 10 -(225+ boxlo) which is (-) ve The more firm 2 decides not to enter. Now l U p=100-X . Conoidu Film I only TRE (100-XX scandal kith = 100-2X CamScanner 12 = C a C

x=20

1- Leadis 2 - Follower F=225 - mc=60 P = 100-X whue x is total output _X = X,+x2 - Leady Fellowes output output = Revenue - Cost I P. 42 - (225 + 60 X2) = 1100 - X.-X1) X2 - 225 – 60X2 2720 dX 10o-X, -28z - 600 - 100 - X; - 60 X2 - 2 now, Fol Firm I 7 - P. x, - 608, = 600 - XL-X2.) X, - 60 X1 1100 - X - 100 + X1 + 30 2 2 Oxy - floo - X1 – 20144 - 60X7 Scanned, with Camom

2 T - oxi 100 - X1 - 20-60=0 - - XH = 20 Xo = 100-X, -60 To = 20 2 X = alo X: +X2 30 Scanned with CamScanner nneth _

Note that when X=30 , P = 70 - 7 = Revenue - Cost = 70X10- (225+ boxlo) which is (-)ve Theufore him 2 decides not to enter whead Now l U p=100-X . Considu Film I only TRE 0 0 - XX I I MR = 100-2X 1 MR=mc 2x = 60 21x230 frescanned-with- CS CamScanner Spiral