Solve for the market price for the lampshades

Assignment Help Business Economics

Reference no: EM131385450

Suppose that there are only two firms (Firm A and Firm B) in the market for decorative lampshades. Let the inverse demand function and the total cost function be given by: P = 50 –Q and TC = 2Q

Assume that Firm A and Firm B sell identical lampshades. The firms compete with each other bychoosing the quantity of lampshades the wish to produce. Firms set their quantities simultaneously.

(a) Derive the reaction function for Firm A.

(b) Derive the reaction function for firm B.

(c) Sketch the reaction functions on a graph. Put the quantity produced by Firm A on the x-axis and thequantity produced by Firm B on the y-axis.

(d) Solve for the equilibrium quantity produced by Firm A. Solve for the equilibrium quantity producedby Firm B.

(e) Solve for the market price for the lampshades.

(f) Solve for the profit earned by each firm. What’s the industry profit?

Reference no: EM131385450

Questions Cloud

The equivalent uniform annual cost : At an interest rate of 2 % per month, money will double in value in how many months? A manufacturer purchased $15,000 worth of equipment with a useful life of six years and a $2000 salvage value at the end of the six years. Assuming a 12 % interest ..

Which social media tools are used by the google : Which social media tools are used by the Google? (please provide links - at least 4). How good the Google is in leveraging the various social media tools?

Explain cournot competition : Explain Cournot competition. Illustrate and explain strategic substition. Illusrate and discuss the operation of the Cournot model as it relates to the empirical evidence regarding 1) price markups over marginal cost and the number of competitors and..

Two firms in the market for decorative lampshades : Suppose that there are only two firms (Firm A and Firm B) in the market for decorative lampshades. Letthe inverse demand function and the total cost function be given by P = 50 –Q and TC = 2Q. How many lampshades will Firm A choose to produce?

Solve for the market price for the lampshades : Suppose that there are only two firms (Firm A and Firm B) in the market for decorative lampshades. Let the inverse demand function and the total cost function be given by: P = 50 –Q and TC = 2Q. Derive the reaction function for Firm A. Solve for t..

What is the profit earned by each firm in the industry : Suppose that there are only two firms (Firm A and Firm B) in the market for decorative lampshades. Let the inverse demand function and the total cost function be given by: P = 50 –Q and TC = 2Q. How many lampshades would be produced by the entire i..

Two laws that affect the operations of labor markets : Two laws that affect the operations of labor markets are the minimum wage law and the right to work law (where a person can choose to join a union). Who benefits and who loses from each of these laws. Give at least two examples each.

Calculate his net pay for the month : In addition to this, he has further reliefs of £430. The taxable pay is taxed at the rate of 20 per cent on the first £250, whilst the remainder suffers the 25 per cent tax rate. In addition he pays National Insurance of £190. Calculate his net pa..

Calculate his net pay for the month : The first £800 per month is free of income tax, on the next £120 he pays tax at the 20 per cent rate and above that he pays at the 25 per cent rate. He also pays National Insurance for the month of £620. Calculate his net pay for the month.

User Account

All Pages