Question

Suppose two firms are competing in prices (Bertrand) in an industry where demand is P=360-12Q. Assume neither firm faces any fixed costs. (a) If both firms have MC=150, what is the equilibrium price? Profits? (b) Suppose Firm 1 has MC1 = 240 and Firm 2 has MC2 = 0. Approximately how much profit does each firm make? (c) Suppose Firm 1 has MC1 = 204 and Firm 2 has MC2 = 96. Approximately how much profit does each firm make?

Answer #1

Answers)

If you have any doubts please comment...

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...

Suppose that an industry consists of two firms. These
firms are Bertrand competitors. The inverse market demand equation
for the output of the industry is P = 33 − 5Q, where Q is measured
in thousands of units. Each firm has a marginal cost of $3. Based
on this information we can conclude that:
P = $1.5 and each firm will sell 6,300
units.
P = $5 and each firm will sell 2,800
units.
None of the options.
P =...

Consider the market for electricity in New York State. Suppose
that the demand for electricity is given by Q=16-0.2P (P=80-5Q)
where Q is measured in billions of kwh and P is measured in cents.
The marginal cost of producing electricity in NYS is MC=5+Q.
Suppose that there are three firms in this market who are
competing on the wholesale market by choosing prices (Bertrand
Competition). Firm 1 has a MC=15, Firm 2 has a MC=12, and Firm 3
has a...

Suppose two identical firms are in Bertrand Competition with the
following market demand and marginal costs P = 124 − 6Q MC = 4
1 Assuming both firms collude what would the price, quantities
and (one period) profits be?
2 Assume both firms are colluding to raise the equilibrium
price. If one firm defected from (i.e. broke) their agreement how
much would they earn? (Assume the game was played once.)
3 Now assume the game is infinitely repeated and the...

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 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 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...

Suppose there are two firms in the market. Let Q1 be the output
of the first firm and Q2 be the output of the second. Both firms
have the same marginal costs: MC1 = MC2 = $5 and zero fixed costs.
The market demand curve is P = 53 − Q.
(a) (6 points) Suppose (as in the Cournot model) that each firm
chooses its profit-maximizing level of output assuming that its
competitor’s output is fixed. Find each firm’s reaction...

Two firms are considering producing a new product, tempered
glass for the auto market. They will make the same product and face
the same demand curve, given by p = 100 − 4Q, where p is in dollars
per pound of glass produced and Q is thousands of pounds produced
per month. Firm 1 has marginal cost MC1 = $5 per pound,
while firm 2 has MC2 = $10 per pound.
If the firms engage in Bertrand price competition,
(a)...

Suppose a cartel is made of 2 firms and it's aggregate
market demand curve which faces the whole cartel is given by: Q :
5,00,000-10,000 P . The cartel
knows by some estimate that its profit-maximizing price is Rs. 40
per unit. The two firms face the following MC functions:
MCI : 7 + .OOIQI MC2 : 16.6 + .O002Q2
Q. (a) What is the MR of the cartel at the profit-maximizing
output? (b) What is the quantity allotted to...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 11 minutes ago

asked 16 minutes ago

asked 23 minutes ago

asked 39 minutes ago

asked 40 minutes ago

asked 49 minutes ago

asked 50 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago