What are firms profit in equilibrium

Assignment Help Business Economics

Reference no: EM13896769

The inverse market demand for fax paper is given by P=400-2Q. There are two firms who produce fax paper. Each firm has a unit cost of production equal to 40, and they compete in the market in quantities. That is, they can choose any quantity to produce, and they make their quantity choices simultaneously.

a. Show how to derive the Cournot-Nash equilibrium to this game. What are firms' profit in equilibrium?

b. What is the monopoly output i.e. the one that maximizes total industry profit? Why isn't producing one half the monopoly output a Nash equilibrium outcome?

Return to the question again but suppose now that firm 1 has a cost advantage. Its unit cost is constant and equal to 25 whereas firm 2 still has a unit cost of 40. What is the Cournot outcome now? What are the profits for each firm?

Reference no: EM13896769

Questions Cloud

Briefly explain the advantages and disadvantages of software : Briefly explain the advantages and disadvantages of the software

Construction permits are expected to be issued : Suppose that 8000 (i.e 8 units of one thousand) construction permits are expected to be issued in 2010. What would be the point estimate of Phoenix lumber Company’s sales for 2010?

Overview of mourning becomes electra : This excerpt gives you an overview of Mourning Becomes Electra and discusses some of its underlying themes. If you're looking for an entry that will give you great ideas about what to write your paper on, this download is for you.

Determine the optimal number of units to put in package : A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 110 - 0.5P, and the marginal cost of production is $140. Determine the optimal number of units to put in..

What are firms profit in equilibrium : The inverse market demand for fax paper is given by P=400-2Q. There are two firms who produce fax paper. Each firm has a unit cost of production equal to 40, and they compete in the market in quantities. Show how to derive the Cournot-Nash equilibriu..

Compute the days of supply for each item. : Again, using the data for Jones Company in problems 2 and 3, suppose Jones believes that in the upcoming year, the rate of sales expected for each of the five items is as follows. Compute the days of supply for each item.

Based on the best available econometric estimates : Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is -3. The marginal cost of producing the product is constant at $225, while average total cost at current production levels is $315.

Special-purpose machine is to be depreciated linear function : A special-purpose machine is to be depreciated as a linear function of uses (units-of-production method). It costs $35,000 and is expected to produce 150,000 units and then be sold for $5,000. Up to the end of the third year, it had produced 60,000 u..

Determine the annual inventory carrying cost for each item : Compute the dollar values for the information in the above table, determine the annual inventory carrying cost for each item, and the total annual inventory carrying cost.

User Account

All Pages