Question

multiple part question. please answer and cirlcle solutions! i will rate thumbs up for correct answers

The market for disinfectant is dominated by 2 firms, Lysol and Clorox. The marginal cost (MC) for providing disinfectant is $1 (average cost is also $1), and the consumer form their demand for disinfectant via the following inverse demand equation P-5-Q:. The corresponding marginal revenue curve is: P-5-20 a. If Lysol and Clorox decide to collude, what quantities will be sold in the market and what price will consumers pay for this quantity? (5 points) i. Quantity: ii. Price: b. How much profit each will Lysol and Clorox receive if they decide to split production evenly? c. Suppose that Lysol decides to cheat and increase production by one unit. What will be the new market price, and how much revenue and profit will Lysol and Clorox now make? i. New market price: ii. Lysol revenue: iii. Clorox revenue: iv. Lysol profit: v. Clorox profit:

Answer 1

Date : Giren, MC = $1 - Lysol Cy close x Pa S- & where da Qu + de MR then 4 they will act as wiu monopoly produce at MC=MR 5-2d 2.5 QL = 1.25 dc 1.25 2 ů) 5.2.5 = b) Rp = (2.5X2.5) - (1425) $ 3.75 rarea c) Nero = 2.25 • I-25 +1 Qe 1.23 New P 5-(2.25+1.25) $ 1.5 luo 1.5x2.25 $3.375 TRL TRE 1.5x1.25 2 $ 1.875 2 2 he TR - TCL The TCE 3.375 - (1x 2.25) $ 1.125 11875 - (1x1.23); $0.625

6 In Bertrand equilibrium not quantity 5 from compete with price good is homogeneous from lowest price Since will thus consumer buy seller thus both firums set P = MC ..PL: Pc = $1 .. 10 a) 5-8 1 . = 2 units 4 Q = 2 units 15

cousnot equilibrium a) quayel retornar 5 & lyset 1.5-0.54 lysut i) Vlyset ü) Similarly clorex 101 b) S- (161) = $3 3x 1 c) i) TR lyset - Pavlyst 15 3x1 a) Thelorex $3 clorex in) Lysol Profit - TR - TC (3x) - (2x1) $1 20 2) iv) clorex Profit = (3x1) = (2+1) $ fism Lysol , the stackleberg leader will choose its output Vlysit sot reaction fn. firm clorex. to its profits 25 g mat r lyst P Alysof - c(alyst) sit Actores los = o.s vyut 30 atlysol

i max Alysot 5-qve maa. r lyst = (8- q = (1.5-0.5 41 2q P.O.C sou 2 N 5-29 -1.5+q-2 co 89. 2 (a) 5-1.5-2 1.5-0.5(15) 0.78 S (15+0.75) P $2.75 d) (i) TRI 2.75*1.5 = $ 4.125 2.063 (in) TRC = 2.750.75= $