Question

1. Suppose there are only two firms in the marker, firm A and firm B. They produce identical products. Firm A and firm B have the same constant marginal cost, MCA MCB ACA ACB 25 The market demand function is given by 0-400 4P. e. Calculate the profits for each firm in the Cournot model. f. g. Is the monopoly outcome stable? If firm A operates under the monopoly outcome, h. Graph the monopoly outcome, cournot outcome and perfect competition outcome in If these two firms cooperate and act as a monopolist. What is the monopoly price and monopoly output level. what is firm B's choice of output level? one graph. (Hint, the y-axis should be price, x-axis should be quantities) i. If the firms practice under the Stackelberg model and firm A moves first, what is the output levels for firm A and firm B? Calculate the profits for each firm in the Stackelberg model and find that first mover has an advantage by earning more profit. j.

Answer 1

E) in cournot game, Q = 200, P = 50

Then profit of each firm = (50-25)*100 = 2500

( Solved in part h)

%) Coumot olc_ 68.5 4& 50 a A Pc thus ,300-9a 25 DO 30o 400 BR 300- 400-4 p 400-100 .80 P 100-2650 5o

EqmABos mov en, then Max TA St 3009 31.5- qA SL 49 300- 150 - P- lo0 253.45 4 (4345-A5)·다5-1406|250 hp/ KB =