Question

Managers at Firm A and Firm B must make pricing decisions simultaneously. The following demand and long-run cost conditions are common knowledge to the managers:

Qa = 72 – 4Pa + 4 Pb

LACa = LMCa = 2

Qb = 100 – 3Pb + 4 Pa

LACb = LMC b = 6.67

2.1. Derive the best response curve for firm A

2.2. Derive the best response curve for firm B.

Answer #1

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Managers at Firm A and Firm B must make pricing decisions
simultaneously. The following demand and long-run cost conditions
are common knowledge to the managers:
Qa = 72 – 4Pa + 4
Pb
LACa = LMCa = 2
Qb = 100 – 3Pb + 4
Pa
LACb = LMC b = 6.67
2.1. Derive the best response curve for firm A
2.2. Derive the best response curve for firm B.
2.3. What will be the prices charged by firms...

Question 2: Managers at Firm A and Firm B must make pricing
decisions simultaneously. The following demand and long-run cost
conditions are common knowledge to the managers:
Qa = 72 – 4Pa + 4 Pb LACa = LMCa = 2
Qb = 100 – 3Pb + 4 Pa LACb = LMC b = 6.67
2.1. Derive the best response curve for firm A
2.2. Derive the best response curve for firm B.
2.3. What will be the prices charged by...

Suppose the individual inverse demand curves for person A and
person B, respectively, are given by:
PA
= 80 - 0.6qA
PB
= 50 - 0.5qB
and
that MC = $40.
Derive the inverse market demand curve? (Hint: sum the two
demand curves vertically). What’s the price and the quantity at the
kink point?
First draw the inverse individual
demands for persons A and B in the same graph by connecting their
horizontal and vertical intercepts.
(Hint: Sum up...

1- Alpha (Brand A) and Beta (Brand B) are leading brand names of
clothes. The direct demand functions facing each producer are given
by qA = 180 – 2 PA + PB and qB = 120 – 2PB + PA Assume zero
production cost (cA = cB = 0), and solve the following problems:
(i) Derive the price best-response function of firm A as a function
of the price set by firm B. Show your derivations, and draw the
graph...

Question 4 Consider the following game. Firm 1, the leader,
selects an output, q1, after which firm 2, the follower, observes
the choice of q1 and then selects its own output, q2. The resulting
price is one satisfying the industry demand curve P = 200 - q1 -
q2. Both firms have zero fixed costs and a constant marginal cost
of $60. a. Derive the equation for the follower firm’s best
response function. Draw this equation on a diagram with...

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