1. there are two companies (company 1 and company 2) that operate in a market where both firms produce a homogenous item. The two companies sell the item in a market where the demand function is shown by: Q = 11 – 0.25P. Now if Q < 11, = 0, if Q > 11 where Q = q1 + q2 is the total market output and qa is company a's output, a = company s's cost function is: Ca (qa) = 4qa. 1,2. i) Explain the two firms' Bertrand equilibrium pricing and quantities. To enhance your explanation, use response function diagrams. Please show derivations to help work out the question.

1. there are two companies (company 1 and company 2) that operate in a market where both firms produce a homogenous item. The two companies sell the item in a market where the demand function is shown by: Q = 11 – 0.25P. Now if Q < 11, = 0, if Q > 11 where Q = q1 + q2 is the total market output and qa is company a's output, a = company s's cost function is: Ca (qa) = 4qa. 1,2. i) Explain the two firms' Bertrand equilibrium pricing and quantities. To enhance your explanation, use response function diagrams. Please show derivations to help work out the question.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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