Reference no: EM13735953
Suppose there are two firms in a market that each simultaneously chooses a quantity. Firm 1’s quantity is q1, and firm 2’s quantity is q2. Therefore the market quantity is Q = q1 + q2. The market demand curve is given by P = 160 – 3Q. Also, each firm has constant marginal cost equal to 16. There are no fixed costs.
The marginal revenue of the two firms is given by:
MR1 = 160 – 6q1 – 3q2
MR2 = 160 – 3q1 – 6q2.
A) Write the equations of the Best Response Function for each firm.
B) Graph the Best Response Functions of each firm. Put them both on a single graph and identify the Cournot-Nash Equilibrium. Be sure to label your graph carefully and accurately.
C) How much output will each firm produce in the Cournot-Nash equilibrium?
D) What will be the market price of the good?
E) How much profit does each firm make?
F) Now suppose that the two firms form a cartel and decide to maximize joint profits and split the profits evenly. They agree to each produce half of the profit maximizing quantity. How much output will each firm produce? (Hint: If the two firms form a cartel, they will produce together the same amount of output as a monopolist would produce.)
G) Now suppose that Firm 1 decides to cheat on the agreement. Assuming Firm 2 produces the quantity given in F), write the equation for the residual demand that faces Firm 1.
H) If Firm 1 expects Firm 2 to produce the amount of output in F), how much output should Firm 1 produce to maximize their profit?
|
E-banking the next best approach for the namibian market
: Possible topics from the following title, for research purposes1. E-banking the next best approach for the Namibian Market2. the importance of the internal customer: a case study
|
|
Measures of quality of service provided by organization
: One of the major measures of the quality of service provided by any organization is the speed with which it responds to customer complaints. A large family-held department store selling furniture and flooring had undergone a major expansion in the pa..
|
|
Expressed in broad statement to guide ethical decision
: The American Library Association (ALA) has a code of ethics that is "expressed in broad statements to guide ethical decision making. These statements provide a framework; they cannot and do not dictate conducts to cover particular situations." From w..
|
|
Is it important to assess business user attitudes
: Q1: Why is it important to assess business user attitudes, not just their use of information? Q2: What is a work breakdown analysis, and why is this concept important? Q3: What types of project staffing skills have been identified as important for su..
|
|
The marginal revenue of the two firms
: Suppose there are two firms in a market that each simultaneously chooses a quantity. Firm 1’s quantity is q1, and firm 2’s quantity is q2. Therefore the market quantity is Q = q1 + q2. The market demand curve is given by P = 160 – 3Q. Also, each firm..
|
|
Identify trigger conditions that indicate each risk
: 4. For one of the risks identified in Exercises 1 through 3 above, construct a cause and effect diagram to determine possible root causes. Determine which of the possible root causes are probable. Describe how you would test each probable root cause ..
|
|
What are leakages and how do they affect the economy
: Assume that initial GDP is $1,000 and we want to expand it to $1,600. Average MPC for the country is 2/3. What should be the new level of government spending if the initial level is $100. Also how much of a tax policy change reach to the same results..
|
|
What views might they, in turn express
: If you were to participate in a discussion or debate on the topic of leadership with Plato and Shakespeare,a) what points would you make?b) what views might they, in turn express?c) what are the most telling insights that might arise from the discour..
|
|
Suppose that the equilibrium price in the market
: Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:
|