Question

Assume that there are two firms in an industry, each producing with a constant marginal cost...

Assume that there are two firms in an industry, each producing with a constant marginal cost function of MC = 10. Assume that the demand function for the product is defined as follows: Q = 200 – 2P.

a) Derive the best reaction functions for both firms. (5 marks)

b) Determine the cournot equilibrium quantities and cournot equilibrium price. (5 marks)
0 0
Add a comment Improve this question Transcribed image text
Know the answer?
Add Answer to:
Assume that there are two firms in an industry, each producing with a constant marginal cost...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Suppose there are two firms in a market producing differentiated products. Both firms have MC=0. The...

    Suppose there are two firms in a market producing differentiated products. Both firms have MC=0. The demand for firm 1 and 2’s products are given by: q1(p1,p2) = 5 - 2p1 + p2 q2(p1,p2) = 5 - 2p2 + p1 a. First, suppose that the two firms compete in prices (i.e. Bertrand). Compute and graph each firm’s best response functions. What is the sign of the slope of the firms’ best-response functions? Are prices strategic substitutes or complements? b. Solve...

  • There are 2 firms in a market producing differentiated products. The firms both have MC that...

    There are 2 firms in a market producing differentiated products. The firms both have MC that is equal to 0 Firm 1 demand is q1(p1,p2) = 6-2p1 + p2 Firm 2 demand is q2(p1,p2) = 6-2p2 + p1 1. Firms compete in quantities- Cournot Competition. What are the inverse demand functions for firm 1 and 2? 2. Find and graph each firm’s best response functions. The quantities are strategic substitutes or complements? 3. Find the Nash equilibrium prices and quantities...

  • A homogeneous products duopoly faces a market demand function given by P a - Q, where...

    A homogeneous products duopoly faces a market demand function given by P a - Q, where QQ Q2 and a>300. Both firms have constant marginal costs MC-100. There are no fixed costs. a) What is firm 1's optimal quantity given that firm 2 produces an output of 50 units per year? And what is firm's 1 quantity if firm 2 produces 20 units? [4 marks] b) Derive the equation of each firm's reaction function and provide a graphical explanation to...

  • An industry has two firms each of which produces output at a constant unit cost of...

    An industry has two firms each of which produces output at a constant unit cost of $10 per unit. The demand function for the industry is q = 1/p. The Cournot equilibrium price for this industry is Group of answer choices $10. $15. $5. $25. $20.

  • can someone help me with question 9? QUESTION 9 A homogeneous products duopoly faces a market...

    can someone help me with question 9? QUESTION 9 A homogeneous products duopoly faces a market demand function given by P-a-Q, where Q Q1 + Q2 and a-300. Both firms have constant marginal costs MC-100. There are no fixed costs a) What is firm 1's optimal quantity given that firm 2 produces an output of 50 units per year? And what is frm's 1 quantity if firm 2 produces 20 units? 4 marks) b) Derive the equation of each firm's...

  • 10. Two firms produce a homogenous product. The industry demand curve is: P-40-40 And the marginal...

    10. Two firms produce a homogenous product. The industry demand curve is: P-40-40 And the marginal cost for each firm is MC-4 What is the equilibrium P, Q for each firm in a Bertrand model? What is the equilibrium P, Q for each firm in a Cournot model? a. b.

  • Assume quantities need not be integers. Market demand is MWTP=80-Q. Each firm in a constant-cost industry...

    Assume quantities need not be integers. Market demand is MWTP=80-Q. Each firm in a constant-cost industry has total costs and marginal costs are MC(q)=40+10q. If there are currently 10 firms in the market, what is short-run equilibrium price? Enter a number only, no $ sign.

  • 6. There are two firms in a market with marginal cost functions given by MC:(9) =...

    6. There are two firms in a market with marginal cost functions given by MC:(9) = 59 MC2(q) = q. Market demand is given by D(p) = 20 - 2p. (a) Obtain the competitive equilibrium output and price. Calculate consumer surplus and each firm's producer surplus. (b) Derive the monopoly price when only firm 1 operates. Calculate consumer surplus and each firm's producer surplus. (c) Derive the monopoly price when only firm 2 operates. (d) Now assume that a monopolist...

  • Consider an industry with N identical firms producing a homogeneous product and competing in quantities. The...

    Consider an industry with N identical firms producing a homogeneous product and competing in quantities. The demand function is given by Q = α − P and each firm has constant marginal cost c. Two of the firms are planning to merge. If this merger occurs, the industry would then consist of N – 1 identical firms. Would such a merger occur? Comment more generally on the incentives for merger in oligopoly.

  • 5. Prove that when the production function is homogeneous of degree one, it may be as...

    5. Prove that when the production function is homogeneous of degree one, it may be as f(x) 2MP(x)x where MPi(x) is the marginal product of input i. Hint use Euler's Theorem. 6. Derive the cost function for the linear technology y f(xix2)-axi+bx 7. Given the production function fxi)aIxa In(x), derive the firm's supply function assuming an interior solution, assuming that a>0 and a 0. 8. Consider a duopoly facing an industry demand function, p-a-bQ, where Q tg respective cost functions...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT