Consider an industry with a homogeneous product where firms set output (or capacity) levels and price...
Consider an industry with a homogeneous product where firms set output (or capacity) levels and price is determinied by total output (or capacity). Suppose there is a large number of potential entrants and that each firm can choose one of two possible technologies, with cost functions Ci = Fi = ciqi (i = 1,2).
A. Derive the conditions for a free-entry equilibrium.
B. Show, by means of a numerical example, that there can be more than one equilibrium, with different numbers of large and small firms.
Homework Answers
Add Answer to:
Consider an industry with a homogeneous product where firms set
output (or capacity) levels and price...
Consider an industry where demand has constant price elasticity and firms compete in output levels. In...
Consider an industry where demand has constant price elasticity and firms compete in output levels. In an initial equilibrium, both firms have the same marginal cost, c. Then Firm 1, by investing heavily in R&D, manages to reduce its marginal cost to c’ < c; a new equilibrium takes place. (a) What impact does the innovation have on the values of H and L? (b) What impact does the innovation have on consumer welfare? L： Lerner index H: herfil index
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand...
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function is Q = 100 – P, where Q is the quantity demanded and P is its price. The total cost functions are given as C1 = 50q1 for firm 1, and C2 = 60qz for firm 2, where Q 91 +92. a. (6 points) Suppose both firms are Cournot duopolists. Find and graph each firm's reaction function. What would be the equilibrium price,...
3) Suppose that an industry consists of two firms that produces a homogeneous product. Suppose that...
3) Suppose that an industry consists of two firms that produces a homogeneous product. Suppose that each firm decides how much to produce and assumes that its rival will not alter its level of production in response (Cournot Model). The industry demand equation is: P 145 5(Q1+ Q2) where Qland Q2 represents the output of Firm 1 and Firm 2, respectively. The total cost equations of the two firms are: TCF 3Q1 and TCF 5Q2 A, Calculate each firm's Best...
Question 2: Simultaneous quantity choiceTwo firms F1 and F2 produce a homogeneous product and compete on...
Question 2: Simultaneous quantity choiceTwo firms F1 and F2 produce a homogeneous product and compete on the same market. The market price is described by the inverse demand curveP= 11−2Q, where Q is total industry output andPis the market price. To keep things simple, suppose that each firm can produce either 1 or 2 units (these are the only possible choices of production).Further suppose that both firms have a constant marginal cost equal to 2, so that the total cost...
Consider a market where N firms produce a homogeneous product and compete by simultaneously setting quantities....
Consider a market where N firms produce a homogeneous product and compete by simultaneously setting quantities. The inverse demand function has the general form P PO-P(qi +q2 +q3 + + qv), where Q is total quantity produced, qi is the quantity produced by firm i and P is the market price. The demand curve is downward sloping, so P10 < 0. The total cost of firm i is given by Cig). (0) Show that P- MC qi i , where...
1. (25 points) The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. Al...
1. (25 points) The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. All firms are identical in terms of their technological capabilities. Thus the cost function as given below for a representative firm can be assumed to function faced by each firm in the industry. The total cost and marginal cost functions t the representative firm are...
Problem 1. Consider an industry that initially has 50 firms, with cost functions of C(y) 25y2+400,...
Problem 1. Consider an industry that initially has 50 firms, with cost functions of C(y) 25y2+400, and that there are a large number of other firms that can produce the output of the industry at the same cost. Throughout this problem, short- and long-run will be used to refer to industry short- and long-run (a) Initially let demand be P-300-.5Y (i) What will be the short-run price? Explain. ii) What will be the long-run price? Explain. (ii) How many firms...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each fir...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
Consider the following two graphs for a product produced in a perfectly competitive market (think, for...
Consider the following two graphs for a product produced in a perfectly competitive market (think, for example, corn or oats). The graph on top shows the market supply and demand functions for this product. The one at the bottom is the cost curves for a typical firm in the industry producing this product. These cost curves pertain to long run. As you know, in the long run firms can change the amounts of invested capital, new firms can enter the...
15. Which of the following is a true statement about the difference between a price-taker firm and a competitive price-s...
15. Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run (more than one answer is correct)? a. Both will sell their products at a price equal to average total cost, but only the price-searcher will produce at minimum average total cost. b. Both will sell their products at a price equal to marginal cost, and only the competitive price searcher will produce at minimum average...
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function is Q = 100 – P, where Q is the quantity demanded and P is its price. The total cost functions are given as C1 = 50q1 for firm 1, and C2 = 60qz for firm 2, where Q 91 +92. a. (6 points) Suppose both firms are Cournot duopolists. Find and graph each firm's reaction function. What would be the equilibrium price,...
3) Suppose that an industry consists of two firms that produces a homogeneous product. Suppose that each firm decides how much to produce and assumes that its rival will not alter its level of production in response (Cournot Model). The industry demand equation is: P 145 5(Q1+ Q2) where Qland Q2 represents the output of Firm 1 and Firm 2, respectively. The total cost equations of the two firms are: TCF 3Q1 and TCF 5Q2 A, Calculate each firm's Best...
Consider a market where N firms produce a homogeneous product and compete by simultaneously setting quantities. The inverse demand function has the general form P PO-P(qi +q2 +q3 + + qv), where Q is total quantity produced, qi is the quantity produced by firm i and P is the market price. The demand curve is downward sloping, so P10 < 0. The total cost of firm i is given by Cig). (0) Show that P- MC qi i , where...
1. (25 points) The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. All firms are identical in terms of their technological capabilities. Thus the cost function as given below for a representative firm can be assumed to function faced by each firm in the industry. The total cost and marginal cost functions t the representative firm are...
Problem 1. Consider an industry that initially has 50 firms, with cost functions of C(y) 25y2+400, and that there are a large number of other firms that can produce the output of the industry at the same cost. Throughout this problem, short- and long-run will be used to refer to industry short- and long-run (a) Initially let demand be P-300-.5Y (i) What will be the short-run price? Explain. ii) What will be the long-run price? Explain. (ii) How many firms...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
Consider the following two graphs for a product produced in a perfectly competitive market (think, for example, corn or oats). The graph on top shows the market supply and demand functions for this product. The one at the bottom is the cost curves for a typical firm in the industry producing this product. These cost curves pertain to long run. As you know, in the long run firms can change the amounts of invested capital, new firms can enter the...
Most questions answered within 3 hours.
-
Kylie is a single mom with two dependent children,
Tanner, age 7 and Olivia, age 11....
asked 21 minutes ago -
Phosphorous + bromine = phosphorous tribromide. If 35.0 g of
bromine are reacted and 27.9 grams...
asked 1 hour ago -
Derive the long wavelength limit of the Planck energy density
distribution
asked 1 hour ago -
Calculate the pH of each of the following solutions.
0.50 M HBr
3.1×10−4 M KOH
4.2×10−5...
asked 5 hours ago -
For the year ended December 31, Depot Max’s cost of merchandise
sold was $85,600. Inventory at the...
asked 5 hours ago -
Week 10 - Professional Memo Assignment
Professional Memo Assignment
Your mission for this week, should you...
asked 5 hours ago -
Write a Python program that stores the data for each
player on the team, and it...
asked 5 hours ago -
In
the last 3 months, mike never knows when he is going to get his
allowance...
asked 5 hours ago -
Is Ca(OH)2 a Bronsted base, Lewis base, or both? Why?
asked 5 hours ago -
1A- Why don’t voters complain about U.S. tariffs on imported
sugar?
Because sugar is only a...
asked 5 hours ago -
Cash Payback Period
Primera Banco is evaluating two capital investment proposals for
a drive-up ATM kiosk,...
asked 5 hours ago -
Create a button in Swift (Xcode) that will create a charge,
create a charge using Stripe's...
asked 5 hours ago