Question

) Suppose two identical firms with the constant marginal cost produce the same product and compete in the market. (10) under which model the equilibrium profit for each firm must be zero? Bertrand or Cournot model, or neither

Answer #1

Under Bertrand model, with two firms and with constant marginal cost that produce same product results in zero economic profit. The two firms set the same price to share both the markets and profits. However, if either firm lowers its price even a little it will gain whole market and capture most of the profits of the market. Now, both firms will try to undercut the prices until they sell the product at zero economic profit.

Thus, economic profit must be zero under Bertrand model.

Two firms sell identical products and compete as Cournot
(price-setting) competitors in a market with a demand of p = 150 -
Q. Each firm has a constant marginal and average cost of $3 per
unit of output. Find the quantity each firm will produce and the
price in equilibrium.

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
-2Q.
a. Determine the equilibrium level of output in the market.
b. Determine the equilibrium market price.
c. Determine the profits of each firm.

Suppose that two firms compete in the same market producing
homogenous products with the following inverse demand function:
P=1,000-(Q1+Q2)
The cost function of each firm is given by:
C1=4Q1
C2=4Q2
Suppose that the two firms engage in Bertrand price
competition. What price should firm 1 set in equilibrium? What
price should firm 2 set? What are the profits for each firm in
equilibrium? What is the total market output?
Suppose that the two firms collude in quantity, i.e.,
acting together...

Consider two firms, Firm A and Firm B, who compete as
duopolists. Each firm produces an identical product. The total
inverse demand curve for the industry is ? = 250 − (?? + ?? ). Firm
A has a total cost curve ?? (?? ) = 100 + ?? 2 . Firm B has a total
cost curve ?? (?? ) = 100 + 2??.
a. Suppose for now, only Firm A exists (?? = 0). What is the
Monopoly...

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...

6: When we have a homogeneous product duopoly, each firm has
constant marginal cost of 10. The market inverse demand curve is p
= 250 – 2Q where Q = q1 + q2 is the sum of the outputs of firms 1
and 2, and p is the price of the good. Marginal and average cost
for each firm is 10. (a) In this market, what are the Cournot and
Bertrand equilibrium quantities and prices? Will the firms collude
in...

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...

Under the same demand curve and marginal cost, which of the
following model is the most profitable for firms? Choose one and
provide your reasons.
Bertrand competition.
Cournot competition.
Perfect competition.
Each model ensures the same profit.

Under the same demand curve and marginal cost, which of the
following model is the most profitable for firms? Choose one and
provide your reasons.
Bertrand competition.
Cournot competition.
Perfect competition.
Each model ensures the same profit

Under the same demand curve and marginal cost, which of the
following model is the most profitable for firms? Choose one and
provide your reasons.
Bertrand competition.
Cournot competition.
Perfect competition.
Each model ensures the same profit.

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