3. Assume for simplicity that a monopolist has no costs of production and faces a demand curve given by Q = 150 – P (a) Calculate the profit-maximizing price-quantity combination for this monopolist. Also calculate the monopolisť's profit. (b) Suppose instead that there are two firms in the market facing the demand and cost conditions just described for their identical products. Firms choose quantities simultaneously as in the Cournot model. Compute the outputs in the Nash equilibrium. Also compute market output, price, and firm profits. (c) Suppose the two firms choose prices simultaneously as in the Bertrand model. Compute the prices in the Nash equilibrium. Also compute firm output and profit as well as market output.
3. Assume for simplicity that a monopolist has no costs of production and faces a demand curve given by Q = 150 – P (a) Calculate the profit-maximizing price-quantity combination for this monopolist. Also calculate the monopolisť's profit. (b) Suppose instead that there are two firms in the market facing the demand and cost conditions just described for their identical products. Firms choose quantities simultaneously as in the Cournot model. Compute the outputs in the Nash equilibrium. Also compute market output, price, and firm profits. (c) Suppose the two firms choose prices simultaneously as in the Bertrand model. Compute the prices in the Nash equilibrium. Also compute firm output and profit as well as market output.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.1P
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