Homework Answers
Profit is maximized where P=MC.
Over the long run, the firm tends to operates at the minimum level of AC.
Hence,
P=MC=AC.
Hence, profit is zero.
Answer: 0
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Suppose...
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Suppose two firms are engaged in price competition (also known as Bertrand competition). Neither firm has capacity constraints, and both firms have identical cost structures given by c(y)= 10+ 2y? What are the equilibrium profits for each firm?
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Problems 3,4 and 5
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Consider a market where n firms are engaged in quantity competition (also known as Cournot competition), where n is a natural number. Each firm has the same cost structures given by c(y)= 10 + 2y3 What will the profits for each firm be as n gets larger and larger? In other words, what will the profits of each firm be as n approaches infinity?
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