User Account

All Pages

Calculate optimal profit of firm

Assignment Help Business Economics
Reference no: EM133125545

Consider a market for DRAM chips used in computer processors. The industry consists of only two firms. The market demand function is given by:

P = 172 - 2Q

Where Q = Q1 + Q2, is the industry output and P the price. Q1 and Q2 are the outputs of the two firms respectively.

The total cost functions for the two firms are given by:

TC1 = 16Q1 + 300

TC2 = Q2 2 + 4Q2 + 172

(a) Assume that the two firms behave as Cournot Duopolists. Explaining the concept of "best response" or "reaction" function, determine the best response function for each firm. Calculate the Nash-Cournot equilibrium output for each firm and the market price. Graphically show the NashCournot equilibrium. Calculate optimal profit of each firm.

(b) Assume that the two firms collude and form a cartel to maximize their joint profit. Calculate the optimal output and profit for each firm and the market price. Also, calculate the resulting profit of cartel. Determine whether firm 1 has any incentive to "cheat" the cartel by overproducing.

(c) Now, suppose that firm 1 acts as a Stackelberg leader and firm 2 acts as a follower. Calculate optimal outputs of the two firms and the market price. Also, calculate each firm's optimal profit.

(d) While collusion may be illegal but merger and acquisitions may not be. If firm 1 3 wants to buy firm 2 (and firm 2 ceases to exist after that) calculate the maximum price that firm 1 can offer.

Reference no: EM133125545

Questions Cloud

Exercise managerial control over the medical staff : Compared to retrospective reimbursement, prospective reimbursement would be expected to weaken the ability of hospital managers to exercise managerial control o
Religious traditions and comparison of approaches to bible : Brief history of the 2 religious traditions and a comparison of their approaches to the Bible. Rituals and core beliefs
What is Annalisa stock basis : How much gain does Annalisa recognize, what is Annalisa's stock basis, and what is the basis of the land to the corporation, respectively
What is insider trading : What is insider trading? Should it remain illegal in the US, for it is not illegal in many countries?
Calculate optimal profit of firm : Consider a market for DRAM chips used in computer processors. The industry consists of only two firms. The market demand function is given by:
Briefly summarize the old framework : Briefly summarize the old framework: Monetary Policy under Limited Reserves. How did the Financial Crisis in 2007-2009 change the monetary policy?
Why is demography important especially during pandemic : 1. What is your religion? Give an example on how media and technology helps to strengthen your belief.
How long do customers take to pay their bills : The following figures have been extracted from the financial accounts of ABC Ltd: How long do customers take to pay their bills
Integrate functional business strategies : Develop an international business plan that, among other things, examines the various dynamic changes affecting international business environments

Reviews

Write a Review

Business Economics Questions & Answers

  What is the firms supply curve

Plot the average total cost, average variable cost, and marginal cost curves for a single firm (remember that values for marginal cost are plotted at the midpoint of the respective intervals) What is the firm's supply curve? How many chairs would the..

  When confronted with a natural monopoly

When confronted with a natural monopoly that restricts output and charges monopoly prices, the two methods that government have for promoting better outcome are:

  What is the amount percentage increase in purchasing

What is the amount percentage increase in purchasing power a lender earned if the lender charged a nominal interest rate o 8% on a loan

  What would the winning price be

You are considering auctioning a Leonardo Da Vinci original sketch. You entice four bidders to come to your auction.

  List the opportunities for improving communication

List the opportunities for improving communication between the front office department with other department.

  Production exhibit scale economies or scope economies

A sports store puts designs 12 different designs on sweat shirts. Setup between each design takes an hour and costs $18,000. Once setup, at a cost of $8,000 they can produce 1,000 units. Does this production exhibit scale economies or scope economies..

  Retirement goals-propose recommendations on how to optimize

You have been hired as a Financial Advisor to review Charles and Susan’s retirement goals and propose recommendations on how to optimize their savings. Write recommendations based on the answers for 1-7 or propose a new plan on how the Smiths can rea..

  Calculate the pw of a phd degree over

Calculate the PW of a Ph.D. degree over a B.S. degree using the data from Example 5.7. Assume that graduate school takes 5 years to complete.

  What happens to prices and output in the short run

the short-run equilibrium values; and vi. the long-run equilibrium values. State in words what happens to prices and output in the short run and the long run.

  Read decision point-who needs ethics

Read Decision Point: Who Needs Ethics? Can the Market "Fix" discrimination? (p. 292) and answer questions at the end of the exercise Laura P. Hartman

  Target overstepped the acceptable privacy boundary

Privacy issues are becoming more of a concern as more and more information is gathered by organizations we do business with. Do you believe Target overstepped the acceptable privacy boundary? What do you suggest Target might have done differently to ..

  Households will be charged for solid waste disposal

Under the responsibility scheme proposed by the Hong Kong government, households will be charged for solid waste disposal. Is this charge justifiable from an economics point of view? Explain your answer with a diagram ( IT is Microeconomic question)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd