QUESTION 25Consider a Cournot oligopoly with two firms, where the demand curves are given byP, = 100-Q, - 2Q2P2 = 100- 2Q1 -Q2and that costs are given by TC(Q1) = Q, , MC, = 2Q1, TC(Q2) = Q²2, and MC2 = 2Q2.Also, marginal revenues can be written as MR, = 100– 2Q, - 2Q2, MR2 = 100- 2Q, - 2Q2.Now, suppose that a marketing company approaches firm 1 and tells them that they can help them differentiate their product, so that insteadof firm 2 affecting their demand curve in the manner described by the equation in P1 above, they guarantee that firm 1's demand equationafter marketing will be of the formP1 = 100-Q1 -BQ2,where B is estimated to lie somewhere between 0 and 1. In this case, firm 1's marginal revenue function would beMR1 = 100 – 2Q1-BQ2.Without any further information, and knowing only that B will fall somewhere between 0 and 1, what is the maximum amount firm 1 should beprepared to pay for these marketing services? (There is an exact answer to this question, which I hope for you to arrive at. But in order toavoid decimal/rounding error, please choose the range within which the correct answer falls).O Between $650-700.O Between $350-400.O Between $250-300.O Between $1000-1500.

Given, Cournot oligopoly demand functions of two firms : Firm 1 : P1= 100 - Q1 - 2Q2 Firm 2 : P2=…

Consider a Cournot oligopoly with two firms, where the demand curves are given by P, = 100- Q1 - 2Q2 P2 = 100– 2Q, –Q2 and that costs are given by TC(Q1) = Q, , MC, = 2Q1, TC(Q2) =Q²2, and MC2 = 2Q2.

Consider a Cournot oligopoly with two firms, where the demand curves are given by P, = 100- Q1 - 2Q2 P2 = 100– 2Q, –Q2 and that costs are given by TC(Q1) = Q, , MC, = 2Q1, TC(Q2) =Q²2, and MC2 = 2Q2.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 2E

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