Suppose three identical firms are engaged in cournot

Assignment Help Microeconomics
Reference no: EM13376042

Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs = 40. Market demand is given by: P(X) = 180 - X = 180 - (x1 + x2 + x3), where P denotes price, X total quantity demanded, and xi individual demand for firms i = 1, 2, and 3. a) Write down the demand curve and marginal revenue curve for firm 1.

b) What is the first order condition for profit maximization for firm 1? compute the optimum quantity x1 for firm 1 as function of quantities x2 and x3.

c) Since the firms are identical, symmetrical solutions exist also for for the two other firms. Use this to compute the optimum quantity produced (and sold) for each firm.

d) Compute total demand, X, and market price, P. Compute each firm's profit Ki, and the sum total of all profits.

e) Suppose firm1 and firm2 merge. Call the new firm A. It has output Xa and profit Ka. Suppose there's a Cournot competition after the merger, and assuming for now, the marginal cost for firm A is still 40 (same as firm3), compute quantities, market price, and profits for both the merged firm and firm3

f) Is the total quantity produced (and sold) larger or smaller than before?

Reference no: EM13376042

Questions Cloud

The financial statement dataset used for ratio analysis is : the financial statement dataset used for ratio analysis is available in an excel file on blackboard. the dataset
Write a brief for the central banker of ireland outlining : write a brief for the central banker of ireland outlining your recommendation on the interest rate that should be set
1what do you understand by the following terms explain : 1.what do you understand by the following terms? explain using formulae diagrams and examples. what are the
You and your friend have decided to open a company selling : you and your friend have decided to open a company selling product of your choice. use any one of the above mention
Suppose three identical firms are engaged in cournot : suppose three identical firms are engaged in cournot competition in quantities. they all have marginal costs 40.
1 explain how demand elasticity and total revenue are all : 1 explain how demand elasticity and total revenue are all related to each other. explain this relationship using at
1 a describe the four market types by writing a separate : 1. a. describe the four market types by writing a separate paragraph for each. in your response for each market type be
A compare the initial sum of profits of the two individual : a compare the initial sum of profits of the two individual firms p1 p2 with the profits of the merged firm pa. explain
Answer the following questions based on the graph that : answer the following questions based on the graph that represents j.r.s demand for ribs per week of ribs at judys rib

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

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!

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