1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices. (a) Draw the two firms' reaction functions in a diagram with p1 and p2 on the axes. (b) Determine the equilibrium prices and quantities.

Question

1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices.

(a) Draw the two firms' reaction functions in a diagram with p1 and p2 on the axes.

(b) Determine the equilibrium prices and quantities. 

 

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Economics

Introduction to Game theory

Related Economics Q&A

Find answers to questions asked by students like you.

Q: Using the market for loanable funds, assuming MPC ≠ 1. Suppose a government that taxed all interest ...

A: In market for loanable funds, the interaction of borrowers and lenders determines the market interes...

Q: If the population growth rate increases by 5% and the depreciation rate decreases by 5%, what happen...

A: A rise in the population growth rate and a fall in the depreciation rate by the same percentage will...

Q: Question 32 Consider a firm with production function f(L,K)=3L1/3K2/3. Assume that capital is fixed ...

A: The production function is the technical relation between the inputs used and the output produced. T...

Q: Suppose that price is below the minimum average total cost (ATC) but above the minimum average varia...

A: In perfect competition, every seller in the market would be a price taker. A perfectly competitive f...

Q: PE19   Determine whether each of the following would cause the economy’s PPF to shift inward, outwar...

A: Answer - Dera studentThank you for submitting your question.Since we only answerup to three sub part...

Q: For a given real interest rate, a decrease in the inflation rate would   a. increase the after...

A: We know,Real interest rate = Nominal interest rate – inflation rateTherefore, a decrease in inflatio...

Q: a) What are the determinants of production? Explain.b) Suppose that an economy’s production function...

A: The production function is a function that shows the relationship between output produced in an econ...

Q: Consider the production function of the firm below. What is the total output at point C? a. 150 b. 1...

A: The production function is the functional relationship between the physical quantities of inputs use...

Q: 7. LO 2, 4 Suppose that a consumer can earn a higher wage rate for working overtime. That is, for th...

A: Let the consumer has two goods to consume, consumption (C) and leisure (l). The consumer’s budget co...

Q: The optimal level of production for any company is the level of production that either maximizes pro...

A: All firms will make the production where its marginal revenue (MR) equals to marginal cost (MC), to ...

Q: given the following informationon quantity consumed of cheese and total utility for Carl answer the ...

A: 1. Total Utility (TU) refers to the total utility received from the consumption ofa good or service....

Q: Two individuals, Sam and Barb, derive utility from the hours of leisure (L) they consume and from th...

A: To determine how there can be fewer leisure activities spend would be associated with the more hours...

Q: The diagram to the right shows a consumer's indifference map for goods X and Y plus three budget lin...

A: To find the price of good X along the indifference curve L1.

Q: In order to produce a new product, a firm must lease equipment at a cost of $10,000 per year. The ma...

A: Break-even Point: It refers to a point at which firm earns only normal profit so, total revenue is e...

Q: What is TARP?

A: The term TAPR stands for Troubled Asset Relief Program.

Q: find the partial derivative with respect to L and k  of  y = f(K, L) = A (α ln K + (1 − α) lnL))

A: The function to be considered is:

Q: How can businesses determine the attractiveness of a foreign market?

A: The term market attractiveness is a concept that practices many factors to determine whether or not ...

Q: Savings, Investment Spending, and the Financial System - End of Chapter Questions 12. Indicate wheth...

A: a) When Rupert Moneybucks buys 100 shares of existing Coca-Cola stock, he is investing in a financia...

Q: Explain some reasons why consumption spending and gross private domestic investment spending are so ...

A: GDP (Gross Domestic Product): It refers to the total of market value of all produced final goods and...

Q: How did Ireland's economy grow quickly overtime during 1975-2005?

A: The Irish economy has experienced my economic, social and political changes during 1975-2005.

Q: 12) In the effort to reduce alcohol consumption, the government is considering a $1 tax on each gall...

A: Given: QD= 500,000 – 20,000*PQS= 30,000*PTherefore, at equilibrium,QD=QS500000 – 20000P = 30000P5000...

Q: Why do critics charge that fiscal policy has a “big-government bias”?

A: Answer-Fiscal policy is the notion that government should actively stimulate the economy in bad econ...

Q: Given the following data: Gross Investment Expenditure.. .$200 Government Transfer Payments...150 Bu...

A: Hello, since there are multiple sub-part questions posted, we will answer first three sub-part quest...

Q: Determinants of aggregate demand The following graph shows a decrease in aggregate demand (AD) i...

A: The changes in the determinants that will lead to a fall in aggregate demand are:Consumer expectatio...

Q: Р МС $4.00 ATC $3.00 D $2.50 $2.00 MR 3,000 3,500 4,000

A: The imperfect competition is a market condition in which there will be many sellers selling differen...

Q: Sleek sneakers is one of many firms in the market for shoes. a. Assume that sleek is currently earni...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: ter 12 Homework Saved Help Save & Exit Suppose that consumer spending initially rises by $5 billion ...

A: Given-consumer spending initially rises by $5 billion for every 1 percent rise in household wealth a...

Q: George and John, stranded on an island, use clamshells for money. Last year George caught 300 fish a...

A: Given Information:There are two islands. On one island 300 fish and 5 wild boars are produced. And o...

Q: The country of Opalia produces two goods: footballs and basketballs. Below is a table showing prices...

A: We are authorized to answer three subparts at a time, since you have not mentioned which part you ar...

Q: 1.Using a relevant diagram, illustrate and discuss the Ricardo-Barro Effect 2. Using relevant diagra...

A: Ricardo-Barro Effect or Ricardian equivalence is an economic theory stating that a change in tax rat...

Q: What is numbers 1-5?

A: Dear student, thank you for submitting your question. Since we only answer up to three sub parts, we...

Q: Question 3 Suppose that the cost function of a firm is C(q)=4q. Suppose that this is the only firm i...

A: As the firm is a single seller in the industry it will maximize its profit at MR=MC

Q: MNLOGS harvested logs (with no inputs from othher companies) from their property in northern Minneso...

A: Value added by a firm is the difference between revenues earned by the firm and cost it incurs.

Q: Discuss the four types of unemployment. Rank these from the least serious to the most serious and ex...

A: The most serious type of unemployment includes structural unemployment, frictional unemployment, cyc...

Q: Given the following data: Gross Investment Expenditure.. .$200 Government Transfer Payments...150 Bu...

A: Hey, Thank you for the question. According to our policy we can only answer upto 3 subparts per sess...

Q: Optimizing economic agents use the real interest rate when thinking about the economic costs and ret...

A: Click to see the answer

Q: a) Briefly describe the four phases of a Business Cycle. As of the time of this assignment, in which...

A: a) Business cycle depicts the fluctuations (rise and fall) in total output produced by an economy.

Q: It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) va...

A: Click to see the answer

Q: 8.The Aggregate Supply curve shows the level of real output that the business sector will produce at...

A: Hey, Thank you for the question. According to our policy we can only answer 1 question per session. ...

Q: Which of the following results when an increase in all inputs results in a more-than-proportionate i...

A: Answer - a) Diseconomics of Scale -  It is the opposite of economics of scale . Diseconomics of scal...

Q: Extensive Form, Multistage Game: Firm A currently monopolizes its market and earns profits of $10M. ...

A: To determine the sequential optimum action of players (firm A and B) the backward induction method c...

Q: Refer to the table below. Real Output Demanded, Billions Price Level  Real Output Supplied, Billi...

A: (a) Equilibrium exists when the quantity demanded is equal to the quantity supplied. At equilibrium,...

Q: Firms A and B are contemplating whether or not to invest in R&D. Each has two options: “Invest” ...

A: Gross revenue is calculated without deducting any type of costs from the revenue generated. 

Q: Which of the following can a country increase in the long run by increasing its money growth rate? ...

A: The money spent by the consumers in the market will increases if the money growth rate of the countr...

Q: The graph shows the relevant curves in the paper production market Social MC In the absence of gover...

A:  In the absence of government intervention, the market supply curve is the private MC curve as the f...

Q: 57 In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,00...

A: Option (a) is the correct option that is real income earned by professor plum is highest in the year...

Q: Suppose the California legislature passed a sweeping law to lower the number of regulations for buil...

A: In this case sweeping law will empowers California government to make necessary law and give proper ...

Q: Brief explanation on keynesian model and its diagram

A: Aggregate Demand: It refers to the total demand for goods and services in the economy within a given...

Q: Consider the following production function when K is fixed. (This is a description of the figure: it...

A: To determine whether the given production function shows diminishing marginal product of labor or no...