Reference no: EM131001893
Wolfe and Baker are the only two firms producing door stopers because of such a small market in their area. Both firms have a marginal cost (MC) of $8 and no fixed cost (FC = $0). The demand for door stopers is given by function P = 32 - Q, where P is in dollars and Q is in thousands of door stopers. Because of only two producers in the markt, the total quantity in the market is given by Q = Qm + Qn, where Qm is the number of door stopers that Wolfe produces and Qn is the number of door stopers Baker produces.
BOTH Wolfe and Baker Simultaneously choose what price to Set. Consumers will buy door stopers from the firm with the Lowest Price. If both firms have Equal prices, half will buy from Wolfe and half will buy from Baker, so this market is a Bertrand Duopoly.
A. Plot on a graph Wolfe and Baker's Marginal Cost (MC).
B. Plot on the same graph the Equilibrium Market Price.
C. Baker will choose (the same price as, a higher price than, or a lower price than) Wolfe?
D. When Wolfe and Baker are Price Setters, the Equilibrium Market Price will be ($8, $14, $16, $20, $24). The total equilibrium market quantity will be (12,000, 16,000, 18,000, 24,000, 28,000) door stopers. In equilibrium, Wolfe and Baker will Each produce (6,000, 8,000, 9,000, 12,000, 14,000) door stopers and make a profit of ($0, $36,000, $64,000, $72,000, $108,000).
E. When Wolfe and Baker are Price Setters, the total equilibrium market quantity produced will be (less than, more than, or the same as) the total equilibrium market quantity produced if the Market WERE perfectly competitive.
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: Wolfe and Baker are the only two firms producing door stopers because of such a small market in their area. Both firms have a marginal cost (MC) of $8 and no fixed cost (FC = $0). The demand for door stopers is given by function P = 32 - Q, where P i..
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