6. Two firms, Firm 1 and Firm 2 and are competing in quantities. The demand they are facing is given by p=1-91-92, with p being the price of the good, and q₁ and 92 the quantities produced by firm 1 and 2 respectively. The total cost of firm 1 is TC₁ (91) = 9₁ and the one of firm 2 is TC2 (92) = 292. (a) Find the Cournot equilibrium. (b) The government decides that it wants to make the market more competitive. As such it decides to offer to Firm 1 a license to become the leader in the market. The licence costs F, and if Firm 1 buys it, it will be allowed to choose its quantity before Firm 2. What is the maximum Firm 1

6. Two firms, Firm 1 and Firm 2 and are competing in quantities. The demand they are facing is given by p=1-91-92, with p being the price of the good, and q₁ and 92 the quantities produced by firm 1 and 2 respectively. The total cost of firm 1 is TC₁ (91) = 9₁ and the one of firm 2 is TC2 (92) = 292. (a) Find the Cournot equilibrium. (b) The government decides that it wants to make the market more competitive. As such it decides to offer to Firm 1 a license to become the leader in the market. The licence costs F, and if Firm 1 buys it, it will be allowed to choose its quantity before Firm 2. What is the maximum Firm 1

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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1. Suppose that market demand is given by ? = 120 − ?/3. The two identical firms in the market both have marginal costs of 20. Draw the reaction curves on a graph and find the Cournot equilibrium quantities and price.
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