Question

This is the FOURTH time I'm posting this question please post the full answer of ALL parts A,B,C,D,E. If you can't ,allow somebody else to do it.Thank you!

3. Two firms produce luxury sheepskin auto seat covers, Western Where (WW) and B.B.B. Sheep (BBBS). Each firm has a cost function given by: C()30q +1.5q. The markei demand for these soai covers is reprsenid by h inverse demand equation: p-300-30, where 9-+ total output a) Calculate the profit-maximizing price and quantity for one of the firms if they behave as monopolist. Also calculate its profits. b) Suppose (as in the Cournot model) that each firm chooses its profit-maximizing level of output on the assumption that its competitor's output is fixed. Find each firm's "reaction curve" (i.e., the rule that gives its desired output in terms of its competitor's output). c) Calculate the Cournot equilibrium (i.e., the values of Q1 and Q2 for which both firms are doing as well as they can, given their competitors' output). What are the resulting market price and profits of each firm? d) It occurs to the managers of Western Where and B.B.B. Sheep that they could do a lot better by colluding. If the two firms collude, what would be the profit maximizing choice of output, the industry price, the output and the profit for each firm in this case? e) Suppose Western Where is the Stackelberg leader (i.e., makes its output decisions before B.B.B. Sheep). Find the reaction curves that tell each firm how much to produce in terms of the output of its competitor. What are the resulting market price and profits of each firm?

Answer 1

Page 30o-6 30 210x30)-(30)2-1-5(30)2 6300-100-1350 4050 Ao3 = 00-3)9301-1-542 16p5%)-35%-392-1642 2. Similarly BR2(%) : 1928B 0-39 |

820 9 3037-5-억59:345-2848-125 Dove

yeterom Max Ti St.92A -le -39-Aqo-3a1)|1-309-1。592 = 1500-39-90 Hilar 35% (-54" (180-29)9-1-532 180%-3.542 =

Page ond fom BBB -4억:14 = 300-36 158-58- -330406-991-5-2013 An (158-6-50x alot 2-(105) (91。42)2 -3454.612-688-2346 = a066-58 m/ I TygF: