1) Assume two firms with the same constant average and marginal cost, AC = MC = 12, facing the market demand curve Q1 + Q2 = 60 - P. Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium.
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- A market is served by two firms in Cournot competition, each with a constant marginal cost of $100. The market inverse demand curve is P = 2,000 – 50 Q, where Q is the total market output produced by the two firms, q 1 + q 2. What is Firm 1's reaction function? A. q1 = 400 – 100q2 B. q1 = 19 – 0.5q2 C. q1 = 400 – 0.2P D. q1 = 210 – q2Suppose three firms compete in a homogeneous-product Cournot industry. The market elasticity of demand for the product is −2, and each firm’s marginal cost of production is $50. What is the profit-maximizing equilibrium price?Answer the given question with a proper explanation and step-by-step solution. Suppose inverse demand is given by the following: P = 40 - 0.5Q There are two firms each with the same marginal cost. Marginal Cost is 10. Under Cournot competition, what is the output for firm one? 10 20 25 30
- Consider two identical firms (firm 1 and firm 2) that face a linear market demand curve. Each firmhas a marginal cost of zero and the two firms together face demand: P = 50 - 0.5Q, where Q = Q1 +Q2. Find the Cournot equilibrium quantity and market price for each firm.Consider an industry comprised of three identical firms faced with a linear cost function given by: C(qi) = cqi; for i = 1; 2; 3. Let inverse market demand be given by: P(Q) = a - bQ; where Q = q1 + q2 + q3.a. Compute the Cournot equilibrium; that is, find prices, quantities, and profits.b. Suppose that firms 1 and 2 merge, converting the market into a duopoly consisting of the “superfirm” and firm 3. Compute the new Cournot equilibrium. Once again find prices, quantities, and profits.c. Suppose that all three firms merge. Compute quantities, prices, and profits for the cartel solution.d. Suppose that firm 1 and 2 represent two members of OPEC – Saudi Arabia and Venezuela, say – while firm 3 is a non-OPEC oil exporting country – Russia, say. Describe the dynamics of OPEC. (Hint: re-interpret the solution to part 2, as 1 firm deviating from the fully cartelized solution. Is it convenient to have a partial cartel?)Consider two identical firms (firm 1 and firm 2) that face a linear market demand curve. Each firm has a marginal cost of zero and the two firms together face demand: P = 150 - 0.25Q, where Q = Q1 + Q2. Find the Cournot equilibrium quantity and market price for each firm.
- Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60 – Q. The marginal cost for each firm is €30. What price should Firm 2 charge at the Cournot equilibriumQ4. Consider two firms competing in a Cournot fashion. Each firm has MC=10 and the market demand is given by P=100-Q, where Q is the total market output. What is firm 1's Response function? a. q1=45-.5q2 b. q1=30 c. q2=45-.5q1 d. firm 1 will set p=MCTwo firms compete under Cournot competition with constant marginal costs c_1 = 9 and c_2 = 3. The market demand is P=24-Q. a) Compute the market share of each firm, the market price, and the total quantity produced in the market. b) Compute the HHI index. c) Compute the Lerner index.
- Consider an industry with only two firms: firm A and firm B. The industry’s inverse demand is P(Q) = 400 − 1/10Q where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are no fixed costs and no barriers to exit the market. Suppose that the two firms engage in Cournot competition. Find the equilibrium price in the industry, the equilibrium outputs, as well as the profits for each firm.There are three identical firms in the market research industry. The demand is 1 – Q, where Q = q1 + q2 + q3. The marginal cost is zero. a. Compute the Cournot equilibriumSuppose that Raleigh and Dawes are the only sellers of bicycles in the UK. The inverse market demand function for bicycles is ?(?)=200−2?. Both firms have the same total cost function: ??(?)=12? and the same marginal cost: ??(?)=12.Suppose this market is a Stackelberg oligopoly and Raleigh is the first mover.a) Write down a formula for the reaction function of Dawes.b) Calculate the equilibrium quantity that each firm produces and the equilibrium price in the market.c) At the Stackelberg equilibrium, how much profit does each firm make?Suppose now that the two firms decide to act like a single monopolist.a) What will the total quantity of bicycles sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium.b) Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly.c) For the…
