Question

1. The market for lawn mowers has 13 small firms and one dominant market leader. The total market demand is given by Q_D = 1900 - 3P. The total market supply for the 13 small firms is given by Q_S = 25 + 2P. The dominant firm has a constant marginal cost of $55 per lawn mower. According to the price leadership model, what is the dominant firm's profit-maximizing price? (Write answer without the dollar sign.)

2. The market for lawn mowers has 13 small firms and one dominant market leader. The total market demand is given by Q_D = 1900 - 3P. The total market supply for the 13 small firms is given by Q_S = 25 + 2P. The dominant firm has a constant marginal cost of $55 per lawn mower. At the profit-maximizing price chosen in question 4 above, the dominant firm will produce  lawn mowers and the total output of all 13 small firms together will be  lawn mowers.

3. Total market demand for pillows in San Francisco is given by P = 125 - 0.5Q. There are 2 suppliers of pillows in the market, who each have a constant marginal cost of $5 per pillow. If the 2 firms compete against each other in a Cournot duopoly, how many pillows will each firm produce?

4. Total market demand for pillows in San Francisco is given by P = 125 - 0.5Q. There are 2 suppliers of pillows in the market, who each have a constant marginal cost of $5 per pillow. If the 2 firms compete against each other in a Cournot duopoly, what will be the resulting market price? (Write answer without the dollar sign.)

5. Total market demand for pillows in San Francisco is given by P = 125 - 0.5Q. There are 2 suppliers of pillows in the market, who each have a constant marginal cost of $5 per pillow. Assuming no fixed costs, if the 2 firms compete against each other in a Cournot duopoly, how much lower will the 2 firms' combined profits be compared to if they colluded and acted as a monopoly? (Write answer without a negative sign and without the dollar sign.)

6. There are 2 firms that sell a certain software, Microsoft and Oracle. Microsoft invented the software and so they act as a market leader by first deciding how much of the software they are going to produce each month. Oracle observes this decision by Microsoft and then chooses how much they are going to produce. The marginal cost of producing the software is constant at $2 for both companies. The total market demand for the software is P = 84 - 0.2Q. According to the Stackelberg model, what price will both companies sell the software at? (Write answer without the dollar sign.)

Answer 1