3. Chillin (C) and Coffee Break (B) compete in espresso market by selling imperfect substitutes. The demand equations are: Qc = 100 - pc + PB QB = 100 - pB + pc Assume that marginal cost and average cost is 20 for both firms. a. From the equations, how can you tell these goods are substitutes? How can you tell they are imperfect substitutes? b. Suppose the firms compete by simultaneously choosing price. Find the best response function of each firm as a function of the other firm's price. c. Compute the equilibrium price and quantity for each firm.

3. Chillin (C) and Coffee Break (B) compete in espresso market by selling imperfect substitutes. The demand equations are: Qc = 100 - pc + PB QB = 100 - pB + pc Assume that marginal cost and average cost is 20 for both firms. a. From the equations, how can you tell these goods are substitutes? How can you tell they are imperfect substitutes? b. Suppose the firms compete by simultaneously choosing price. Find the best response function of each firm as a function of the other firm's price. c. Compute the equilibrium price and quantity for each firm.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 4QFR

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