Question

Consider a Bertrand oligopoly consisting of four firms that
produce an identical product at a marginal cost of $120. The
inverse market demand for this product is *P* = 500
-2*Q.*

a. Determine the equilibrium level of output in the market.

b. Determine the equilibrium market price.

c. Determine the profits of each firm.

Answer #1

SCENARIO 3: Consider an industry consisting of two firms
producing an identical product. The inverse market demand equation
is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1
= 4Q1 and TC2 = 4Q2, respectively.
Refer to SCENARIO 3. Suppose that the two firms are Bertrand
rivals. The equilibrium level
of output for firm 1 is:
a. 8.
b. 10.
c. 12.
d. 24.
e. None of the above.

SCENARIO 3: Consider an industry consisting of two firms
producing an identical product. The inverse market demand equation
is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1
= 4Q1 and TC2 = 4Q2, respectively.
Refer to SCENARIO 3. Suppose that the two firms are Cournot
rivals. The equilibrium level
of output for firm 1 is:
a. 8.
b. 16.
c. 24.
d. 32.
e. None of the above.

Consider an industry consisting of two firms producing an
identical product. The inverse market demand equation is P = 100 −
2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and
TC2 = 4Q2, respectively.
Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg
follower. The output of the Stackelberg follower is:
6.
12.
24.
48.
None of the above.

Assume that you observe two firms operating in a Bertrand
oligopoly. The inverse demand function for the market is P = 200 –
2Q and each firm has the same cost function of C(Q) = 20Q. What is
the level of production for each firm, market price, and profit of
each firm? What would happen if both firms merge to form a single
monopoly with a cost function of C(Q) = 20Q?

Consider an industry consisting of two firms producing an
identical product. The inverse market demand equation is P = 100 −
2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and
TC2 = 4Q2, respectively. Suppose that the two firms are Cournot
rivals. Firm 2 will earn a profit of:
$512.
$732.
$836.
$1,014.
None of the above.

Consider an industry consisting of two firms producing
an identical product. The inverse market demand equation is P = 100
− 2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and
TC2 = 4Q2, respectively. Firm 1 is the Stackelberg leader and firm
2 is the Stackelberg follower. The profit of the Stackelberg
follower is:
$864.
$576.
$432.
$288.
$1,152.

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...

SCENARIO 3: Consider an industry consisting of two firms
producing an identical product. The inverse
market demand equation is P = 100 − 2Q. The total cost equations
for firms 1 and 2 are TC1 = 4Q1 and
TC2 = 4Q2, respectively.
Refer to SCENARIO 3. Suppose that the two firms are Cournot
rivals. Firm 1 will earn a
profit of:
a. $512.
b. $732.
c. $836.
d. $1,014.
e. None of the above.

SCENARIO 3: Consider an industry consisting of two firms
producing an identical product. The inverse market demand equation
is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1
= 4Q1 and TC2 = 4Q2, respectively.
Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2
is the Stackelberg
follower. The profit of the Stackelberg leader is:
a. $288.
b. $432.
c. $486.
d. $576.
e. None of the above.

Suppose there are two firms operating in a market. The firms
produce identical products, and the total cost for each firm is
given by C = 10qi, i = 1,2, where qi is the quantity of output
produced by firm i. Therefore the marginal cost for each firm is
constant at MC = 10. Also, the market demand is given by P = 106
–2Q, where Q= q1 + q2 is the total industry output.
The following formulas will be...

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