Question

Consider an oligopolistic market with demand represented by P=250-5Q. Assume that the MC for each firm is MC 50. a) If the firms each have the same MC and the market is characterized by price competition (like Bertrand competition), what will be the equilibrium price? Quantity? Industry profits? b) If the few firms are, instead able to perfectly collude, what will be the equilibrium price? Quantity? Industry profits? c) If the market is characterized by quantity competition (Cournot) and there are TWO firms, what will be the equilibrium price? Quantity? Industry profits? d) If the market is characterized by quantity competition (Cournot) and there are FIVE firms, what will be the equilibrium price? Quantity? Industry profits?

Answer 1

o) In the Cae e p'ce cempeftion , each output level och that p-MC So, given that arket ice, Mc 50 And P- a50-50 put p= 50 50-350-50 良000 Robit Total Cost -Total Revenue : 0000ー2000 D) Industry tu behove tke mongpelt P-50 50e Total Revenue TR

TR500 Manginal Revenue HR dTR Para MR Mc ber 50100 50 maimi2ation P-350-50 50-5x00 P 150 Total Revenue :TR: png 150 0 IR: 3000 TR-Tc Total Pioht - ..Total Roht 000 o Sh isms have milan and

mawket demand i qiven b and eachhe N öms hos Censtotginal Cet c, then eum prc i given by a+Nc Here N-2, a:250, C-50, b-50 850x 50 350 3 Now P- 50- 5q 35050 050 5e 3 3 so, output ob each binm; (8%) 3 Totol cest TMCQ u 000 3 те 1333 . 33 "Total Revenue. TR- p"o

(t 31333. 33 (구구구-78 Total Industry floh 1777 78 a+NC Pe 850 + 3x50 Now P 50- 5 30 Output ot each binm q/3 -30/3 Total cest TMc Q

Total Revenue :Te- p"q=1Dot 30 TR 300D Total Trdusty prob TR-TC = 3000-1500 τ 1500 ửi ) Here N-5, a:050 , c-50,b-50 L at Nc P 50+5 50 d50 3 5+1 → 250-350-582 3 509)3-50 Output eh each 50 1003 TC = 1666.6구 Total RevenueTR P &503) (100 TR= 077チ子8 .'Total Tndustry Rrchht1