Question

Te Intel Intel and + Q2 Two firms intel and AMD in the CPU market have combined demand given by Q = 100-2p. Their costs are given by = 2 Q + Q² Intel TC AMD = 2Q If they cannot AMD AMD successfully collude & Instead produce where the market Price equals marginal cost the market price will be

Answer 1

Market price is 34.

We follow the standard calculation techniques, equate Marginal cost of each firm to the market price and substitute in the market demand equation. After calculation we get the market demand as 16+16=32 and market price equal to 34. The working is shown as follows.

Tcintel 20 intel . t Q intel = MCintal + 2dintel and this equals market price.... Q+ 2 Qintel =P TEAMO 2 QAmo + & MCD 2 + 2 QAMD market price. and this also P equals => 2 t 2. CAND we know that market Demand 100-2P. i.e. Chamot Qintel 100 - 21

we get 1 Substituting in ③ QAmo + Qinkel = 100-2(2+QQinsel) QAND + 5 Quintet 96 - get = 96 ® Similarly substituting ② in 6 , we At Q intel Solving A and ® get Pintel AMD Q. AMD 16 P = 2 + 2x16 34 Therefore the market price is 34

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