Determine the profits of the leader and the follower

Reference no: EM13183815

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 16,000 - 4Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 4,000QL and CF (QF) = 6,000QF..

a. What is the follower's reaction function?

QF = - QL

b. Determine the equilibrium output level for both the leader and the follower.

Leader output:
Follower output:

c. Determine the equilibrium market price.

d. Determine the profits of the leader and the follower.

Reference no: EM13183815

Questions Cloud

Which factor would not increase market power : 1) At a price of $9, the marginal revenue of a monopolistically competitive firm is $5. If the marginal cost of production is $7, what should the firm do? 2)For a monopolistic competitive firm, which factor would not increase market power?

Calculate exact values for required reserves : Suppose banks are required by law to hold 5% of their deposits in reserves and total deposits are $100 million, but banks choose to hold a total of 20% of their deposits in reserves because loans are riskier and potentially unprofitable. Calculate..

What are your profits if you do make the investment : The relevant cost functions are C(Qi) = 4Qi, and the inverse market demand curve for this unique product is given by P = 160 - 2Q. Currently, you and your rival simultaneously (but independently) make production decisions, and the price you fetch ..

Determine the equilibrium level of output in the market : Consider a Bertrand oligopoly consisting of four firms that produce an identical product at a marginal cost of $260. The inverse market demand for this product is P = 800 - 4Q. a. Determine the equilibrium level of output in the market. b. Determin..

Determine the profits of the leader and the follower : The inverse demand for a homogeneous-product Stackelberg duopoly is P = 16,000 - 4Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 4,000QL and CF (QF) = 6,000QF. a. What is the follower's reaction function QF = - Q..

Determine the reaction function for each firm : Determine the reaction function for each firm. Firm 1: Q1 = - Q2, Firm 2: Q2 = - Q1 b. Calculate each firm's equilibrium output. c. Calculate the equilibrium market price. d. Calculate the profit each firm earns in equilibrium.

What is the value of the multiplier : Keynesian Economics: Suppose the following about the economy of the United States: Government spending = 660, planned investment (Ip) = 215, autonomous consumption is 200, net exports is 100 and taxes are 100. In addition, for each additional $1..

Explain the characteristics of natural monopolies : Suppose that a natural monopolist was required by law to charge average total cost. On a diagram, label the price charged and the deadweight loss to society relative to marginal cost pricing. Briefly explain your diagram and comment on the results..

Explain the marginal cost and average total cost curves : In the early 1990's, a study found that moderate daily consumption of red wine reduced the incidence of heart disease in labratory rats. As a result of national press coverage of the report, the demand for red wine increased dramatically. Assume t..

User Account

All Pages