Question

Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 – 2Q,...

Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 – 2Q, where Q is the sum of q1 and q2. q1 is the output of Firm 1 and q2 is the output of Firm 2. Firm 1's marginal cost is constant at $12, while Firm 2's marginal cost is constant at $20. Answer the following questions, assuming that the firms are Cournot competitors.

a. How much output does each firm produce? (answer is q1 = 16 and q2 = 12, but still show the work please)

b. How much profit does each firm earn?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Q1. Consider a Cournot oligopoly in which the market demand curve is Q = 60 -...
Q1. Consider a Cournot oligopoly in which the market demand curve is Q = 60 - P. There are two firms in this market, so Q = q1 + q2. The firms in this market are not identical: Firm 1 faces cost function c1(q1) = 2q12, while firm 2's cost function is c2(q2) = 28q2. In the space below, write down a function for Firm 1's profit, in terms of q1 and q2. Q2. Refer back to the Cournot oligopoly...
Suppose duopolists face the market inverse demand curve P = 100 - Q, Q = q1...
Suppose duopolists face the market inverse demand curve P = 100 - Q, Q = q1 + q2, and both firms have a constant marginal cost of 10 and no fixed costs. If firm 1 is a Stackelberg leader and firm 2's best response function is q2 = (100 - q1)/2, at the Nash-Stackelberg equilibrium firm 1's profit is $Answer
Suppose there are two firms in a market who each simultaneously choose a quantity. Firm 1’s...
Suppose there are two firms in a market who each simultaneously choose 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 - 2Q. Also, each firm has constant marginal cost equal to 10. There are no fixed costs. The marginal revenue of the two firms are given by: MR1 = 160 – 4q1 – 2q2 MR2...
Fill in the blanks. Consider two firms facing the demand curve: P=60-5Q where Q=Q1+Q2. The firm's...
Fill in the blanks. Consider two firms facing the demand curve: P=60-5Q where Q=Q1+Q2. The firm's cost functions are C1(Q1)=15+10Q1 and C2(Q2)=15+20Q2 Combined, the firms will produce __ units of output, of which firm 1 will produce __ units and firm 2 will produce __ units. If the firms compete, then firm 1 will produce __ units of output and firm 2 will produce __ units of output. Draw the firms' reaction curves and sho the equilibrium. Then, indicate the...
Consider a market with two identical firms. The market demand is P = 26 – 2Q,...
Consider a market with two identical firms. The market demand is P = 26 – 2Q, where Q = q1 + q2. MC1 = MC2 = 2. 1. Solve for output and price with collusion. 2. Solve for the Cournot-Nash equilibrium. 3. Now assume this market has a Stackelberg leader, Firm 1. Solve for the quantity, price, and profit for each firm. 4. Assume there is no product differentiation and the firms follow a Bertrand pricing model. Solve for the...
Consider two identical firms competing in a market described by: • (Inverse) Demand: P = 50...
Consider two identical firms competing in a market described by: • (Inverse) Demand: P = 50 − Q , where Q = q1 + q2 • Cost Firm 1: C1 = 20q1 +q1^2 • Cost Firm 2: C2 = 20q2 + q2^2 a. (1 point) What is firm 1’s marginal cost? Firm 2’s marginal cost? What can you observe about these two firms? b.(2 points) What are the equilibrium price (P∗), production quantities (q∗1,q∗2), and profits(π∗1,π∗2), if these firms are...
Four firms compete a la Cournot in a market where inverse demand is given by P...
Four firms compete a la Cournot in a market where inverse demand is given by P = 90 − 2Q. Suppose 3 high-cost firms have constant marginal cost of 20, while one low-cost firm has marginal cost of 10. Find the Nash equilibrium output for each firm where the high-cost firms each produce the same level of output.
Consider two identical firms competing in a market described by: • (Inverse) Demand: P = 50...
Consider two identical firms competing in a market described by: • (Inverse) Demand: P = 50 − Q , where Q = q1 + q2 • Cost Firm 1: C1 = 20q1 +q1^2 • Cost Firm 2: C2 = 20q2 + q2^2 a. (1 point) What is firm 1’s marginal cost? Firm 2’s marginal cost? What can you observe about these two firms? b.(2 points) What are the equilibrium price (P∗), production quantities (q∗1,q∗2), and profits(π∗1,π∗2), if these firms are...
Suppose there are n firms in an oligopoly, the inverse demand is given by P(Q) =...
Suppose there are n firms in an oligopoly, the inverse demand is given by P(Q) = a - Q, where Q = q1+q2+...+qn. Consider the infinitely repeated game based on this stage game. a) What is the lowest value of δ such that the firms can use trigger strategies to sustain the monopoly output level in a SPNE? b) How does the answer vary with n and why? c) If δ is too small for the firms to use trigger...
Two firms, A and B, are Cournot competitors facing the inverse market demand P = 5...
Two firms, A and B, are Cournot competitors facing the inverse market demand P = 5 - 0.001Q, where Q = qA + qB. Each firm has the same total cost function Ci = 2qi , i = A, B. a. (8) Write out the profit function of firm A, then derive the best response functions for A and B. (You only need to derive one best response function because A and B are identical.) Carefully graph the best response...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT