Question

Suppose that market demand for golf balls is described by Q = 90
− 3P, where Q is measured in kilos of balls. There are two firms
that supply the market.

Firm 1 can produce a kilo of balls at a constant unit cost of $15
whereas firm 2 has a constant unit cost equal to $10.

a)Suppose the firms compete in quantities. How much does each firm
sell in a Cournot equilibrium? What is the market price and what
are the firms’ profits?

b)Suppose the firms compete in price. How much does each firm sell
in a Bertrand equilibrium? What is market price and what are the
firms’ profits?

Answer #1

Question 3 Suppose that the market demand curve for golf balls
is described by Q = 90 – 3P where Q is measured in kilos of balls.
There are 2 firms that supply the market. Suppose first that golf
balls produced by the 2 firms are identical. Firm 1 can produce a
kilo of balls at a constant unit cost of $15 whereas firm 2 has a
constant unit cost of $10. (a) Suppose firms compete in quantities.
How much...

Consider a market with only two firms. Demand on this market is
given by D(p)= 90 - 3p. Initially both firms have the same constant
per-unit cost, specifically c1 = c2 = 20 .
(a) What is the Nash equilibrium in this market if firms behave
as Bertrand competitors? How much does each firm produce, what
price do the firms charge, and what are their profits?
(b) Now suppose that firm 1 acquires a new production technique
that lowers its...

Suppose that demand for soccer balls is given by ?=120 – ?.
There are only two firms that produce soccer balls, they both have
cost function ??=60+q?^2, where ?=1,2 denotes the factory. Total
production of soccer balls is equal to output from the two
firms.
a. Suppose the two firms compete on quantities. Find the Nash
equilibrium price and output of each firm. How much profit does
each firm make?
b. Suppose that firm 1 gets their product to market...

The market demand function is Q=10,000-1,000p.
Each firm has a marginal cost of m=$0.16. Firm 1, the leader,
acts before Firm 2, the follower. Solve for the Stackelberg-Nash
equilibrium quantities, prices, and profits. Compare your solution
to the Cournot-Nash equilibrium.
The Stackelberg-Nash equilibrium quantities are:
q1=___________ units
and q2=____________units
The Stackelberg-Nash equilibrium price is:
p=$_____________
Profits for the firms are
profit1=$_______________
and profit2=$_______________
The Cournot-Nash equilibrium quantities are:
q1=______________units
and q2=______________units
The Cournot-Nash equilibrium price is:
p=$______________
Profits for the...

Consider an asymmetric duopoly. The market demand is p = 1 − Q.
Firm 1 has zero cost while Firm 2 has constant marginal cost c
distributed over the interval 0, 1/2.
a. Find the equilibrium when firms compete in quantities.
b. Suppose a regulator can marginally decrease c. Will this change
increase social welfare and why? Give your answer in terms of the
market share of Firm 2.
c. Suppose now that firms compete in prices. Find the Bertrand...

24. Cournot duopolists face a market demand curve given by P =
90 - Q where Q is total market demand. Each firm can produce output
at a constant marginal cost of 30 per unit. There are no fixed
costs. Determine the (1) equilibrium price, (2) quantity, and (3)
economic profits for the total market, (4) the consumer surplus,
and (5) dead weight loss.
25. If the duopolists in question 24 behave according to the
Stackelberg Leader-Follower model, determine the...

Two firms compete to sell a homogenous good in a market
characterized by a demand function Q = 250 – 1/4P. Each firm has
the same cost function at C(Q) = $200Q. Use this information to
compare the output levels and profits in settings characterized by
Cournot, Stackelberg, Bertrand, and Collusive behavior.

Let the market demand for carbonated water be given by QD = 100
− 5P. Let there be two firms producing carbonated water, each with
a constant marginal cost of 2.
a) What is the market equilibrium price and quantity when each firm
behaves as a Cournot duopolist choosing quantities? What profit
does each firm earn?
b) Sketch the Cournot response functions for firm 1 and firm
2.
c) What is the market equilibrium price and quantity when each
firm...

1. Consider a market with inverse demand P (Q) = 100 Q and two
firms with cost function C(q) = 20q.
(A) Find the Stackelberg equilibrium outputs, price and total
profits (with firm 1 as the leader).
(B) Compare total profits, consumer surplus and social welfare
under Stackelberg and Cournot (just say which is bigger).
(C) Are the comparisons intuitively expected?
2. Consider the infinite repetition of the n-firm Bertrand game.
Find the set of discount factors for which full...

Suppose firm A and B operate under conditions of constant
marginal and average cost but that MCA = 10 and MCB = 8. The demand
for the firm’s output is given by Q = 500 – 20P
a) If the firms practice Bertrand competition, what will the
Nash Equilibrium market price be? What will be the profits for each
firm?
b) If the firms practice Cournot competition, what will be the
Nash equilibirum market price? What will be the profits...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 12 minutes ago

asked 22 minutes ago

asked 37 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago