Consider a market with two horizontally differentiated firms, X and Y. Each has a constant marginal cost of $20. Demand functions are: Qx =100−2Px +1Py Qy =100−2Py +1Px Calculate the Bertrand equilibrium in prices in this market. How will the equilibrium change if cross-price elasticities of demand increase by 20%? How would you alter the equations to show such an increase? Compute the new equilibrium
Q: Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces a…
A: Bertrand competition is a model of competition used in economics, named after Joseph Louis François…
Q: Consider an industry with only two firms: firm A and firm B. The industry’s inverse demand is P(Q) =…
A: P(Q) = 400 − 110Q since the two firm engage in quantity competition P becomes 400 −110(q1+q2)…
Q: The inverse market demand in a homogeneous-product Cournot duopoly is P = 200 − 3(Q1 + Q2) and costs…
A: Cournot equilibrium is also known as nash equilibrium as all firms chooses its output…
Q: Assume that two companies (A and B) are duopolists who produce identical products. Demand for the…
A: We have, Demand function: P = 200-QA- QB Total cost of firm A: TCA = 1500 + 55QA +QA^2 Total cost of…
Q: Consider a homogeneous good industry (such as an agricultural product) with just two firms and a…
A: This game represents Bertrand competition of duopoly market structure where two firms select optimum…
Q: Consider a market where two firms (A and B) compete in prices. Each firms produces a differentiated…
A: Marginal cost (MC) is needed in order to determine the equilibrium price and equilibrium quantity.…
Q: Consider two identical firms (firm 1 and firm 2) that face a linear market demand curve. Each firm…
A: The economic model in which firms choose their quantity by considering the quantity set by their…
Q: Alpha and Gamma are the only two phone handset manufacturers in the world. Each firm has a cost…
A: An oligopoly market is one that has few large firms which are interdependent selling homogenous as…
Q: Question 1er. Consider an industry with 6 identical firms, each facing a demand Q = 30,000 × [1/6 –…
A: Answer -
Q: Suppose that, prior to other firms entering the market, the maker of a new smartphone (Way Cool,…
A: Way cool’s profit in the absence of rival, = $80 million The entry of deterrent price, = -$2…
Q: Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces a…
A: The Bertrand (Nash) equilibrium corresponds to price being equal to marginal cost.
Q: Question 1. Firm 1 and Firm 2 are the only two firms in a market where price is determined by the…
A: "Cournot model is a model of oligopoly. In this model, firms compete with each other with respect to…
Q: Suppose three firms compete in a homogeneous-product Cournot industry. The market elasticity of…
A: Given: Number of firms =3 Market elasticity of demand (Ed) = -2 Marginal Cost (MC)= $50
Q: Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given…
A:
Q: Two firms compete by choosing price. Their demand functions are Q, = 20 - P, + P2 and Q2 = 20 + P1 -…
A: Demand function is what describes a relationship between one variable and its determinants. It…
Q: There are two different market under the Galata Bridge. One of them is fried fish sandwich and the…
A: Given, PF = 100-qF+ -0.5qp => qF = 100-PF+ 0.5
Q: Suppose an industry consists of two firms that compete in prices. Each firm produces one product.…
A: The products are homogeneous since they have identical cost structure and have identical demand…
Q: The two major producers in the beer industry, Anheuser-Bush (Firm 1) and Grupo Modelo (Firm 2) are…
A: For the level of output and profits when Firm 2 cheats and Firm 1 colludes, firstly we find the…
Q: Question 1 Consider two identical firms (firm 1 and firm 2) that face a linear market demand curve.…
A: We have demand function P=150-0.25Q MC=0 for both the firms.
Q: Q6 Suppose the market demand is given by Q 3 100 — р, where Q is the total quantity demanded and p…
A: For most competitive equilibria, the First Order Conditions for profit maximisation can be deduced…
Q: Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces a…
A: Answer: Let us first find the marginal revenue for both the firms: Total revenue of firm…
Q: Suppose the inverse demand function for two Cournot duopolists is given by P = 10 – (Q1 + Q2) and…
A: Given, Demand function, P= 10 - Q1 – Q2 Here Q1 = quantity of the firm 1 and Q2 = quantity of the…
Q: Consider an industry with only two firms: firm A and firm B. The industry’s inverse demand is P(Q) =…
A: Demand : P(Q) = 400 − 1/10Q P = 400 − 0.1Q Q=Q1+Q2 P = 400 − 0.1(Q1+Q2) P = 400 − 0.1Q1-0.1Q2 MC=10…
Q: Question #6: Consider a Cournot duopoly, the firms face an (inverse) demand function: Pb = 432 - 7…
A: b
Q: Solve for the Bertrand equilibrium for the firms described below if Firm 1's marginal cost is $15…
A: In a Bertrand competition there are 2 firms competing with each other in terms of price. The firms…
Q: P= 14 - Q, where Q = Q1 + Q2. Both firms have the same structure of total cost functions as %3D…
A: Total cost form firm one is: TC1=2+2Q1 Total cost of firm two is: TC2=2+2Q2 Now, total cost will be:…
Q: Consider a market competing under Cournot Quantity Competition. There are two firms in this market:…
A: We have given demand function and marginal costs, we can find the profit function as
Q: Suppose that demand for cruise ship vacations is given by P =1200 − 5Q, where Q is the total number…
A: Given information: Demand function, P = 1200 - 5Q Marginal cost = $300 Number of sellers = 3
Q: Consider an industry with 2 firms engaging in quantity competition and facing the market demand…
A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…
Q: Duopolists following the Bertrand pricing strategy face a market demand curve given by P 90 - 2Q…
A: Duopolists following Bertrand pricing, demand curve : P = 90 - 2Q and marginal cost is 40 per unit.…
Q: Assume that two companies (C and D) are Cournot duopolists that produce identical products. Demand…
A: Given, ? = 600 − ?c − ?d ??c = 25,000 + 100?c ??d = 20,000 + 125?d
Q: Consider two price-setting oligopolies supplying consumers in a certain region of a country. Firm 1…
A:
Q: You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell…
A: The blackspot computers are a homogeneous product and the given demand function and marginal cost is…
Q: Suppose there are two firms operating in the same market and compete over prices. the firms sell a…
A: q1=-1.5p1+p2+273q2=0.5p1-1.5p2+293TR1=p1q1 =p1(-1.5p1+p2+273)…
Q: You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell…
A: P = 5900 - Q MC = $500 In order to determine reaction function of duopolist firms we set price is…
Q: Two firms compete by choosing price. Their demand functions are Q, = 200 - P, + P2 and Q2 = 200 + P,…
A: Both firm wants to maximize profit given the other firm's choice of price. Here, the marginal cost…
Q: Consider two gas stations in a remote village facing the simple linear market demand Q= 300− 5p but…
A: The market dd curve faced by the two firms (gas station-X and gas station-Y) under a duopoly market…
Q: Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given…
A: There are two firms, i.e., Firm 1 and Firm 2 The marginal cost of each firm is 30. Let's assume Q1…
Q: The market for widgets consists of two firms that produce identical products. Competition in the…
A: We have, P = 280-2(Q1+Q2) C1(Q1) = 3Q1 and C2(Q2) = 2Q2 A) Computation of marginal revenue for each…
Q: Consider an industry with two firms, each of which has a constant marginal cost of 20. The inverse…
A: Inverse Demand Function P(Y) = 220 −Y where Y = y1 + y2 Marginal Cost = 20
Q: Assume that two companies (A and B) are duopolists who produce identical products. Demand for the…
A: The demand function represents the connection between the quantity demanded of a commodity…
Q: Consider two identical firms with a unit cost of production of $10 and a market demand of p= 60-y.…
A: Consider two identical firms with a unit cost of production of $10 and a market demand of p= 60-y.…
Q: The inverse market demand in a homogeneous-product Cournot duopoly is P = 200 − 3(Q1 + Q2) and costs…
A: Hello. Since you have posted multiple parts of the question and not specified which part of the…
Q: Consider an industry that consists of 3 tirms facing a demand curve P = 80 - Q. All three firms have…
A: If firms 2 and 3 merge then the production will take place only in firm 2 because of lower marginal…
Q: Own Price Elasticity of Demand for Own Price Elasticity of Market Demand Representative Firm's…
A: After, all the manager earns valuable skills in how well the firm operates with a combative…
Q: Initially there are six firms producing differentiated products. The demand function for the good…
A: There are 6 firms . Demand function of each firm : qi = 10 - 2pi + 0.3 (P5 ) where , P5 = sum of…
Q: Two firms sell differentiated products and compete in quantities. Inverse demand for the product of…
A: Introduction Oligopoly is a form of market where the existed number of firms is more than 2 and less…
Consider a market with two horizontally differentiated firms, X and Y. Each has a constant marginal cost of $20. Demand functions are:
Qx =100−2Px +1Py
Qy =100−2Py +1Px
Calculate the Bertrand
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
- You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell highpowered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P=5900-Q , and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high-powered computers and has found a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your…Consider a market for crude oil production. There are two firms in the market. The marginal cost of firm 1 is 20, while that of firm 2 is 20. The marginal cost is assumed to be constant. The inverse demand for crude oil is P(Q)=200-Q, where Q is the total production in the market. These two firms are engaging in Cournot competition. Find the production quantity of firm 1 in Nash equilibrium. If necessary, round off two decimal places and answer up to one decimal place.Assume the inverse demand function in a market is given by P ( Q ) = 500 − Q where Q is the total industry output, that is the sum of the output of all firms in the market. There are two firms (indexed by i = 1,2) who both have a cost of producing the good given by c ( q i ) = 10 ∗ q i The two firms are competing in the Cournot manner, that is they choose their quantities simultaneously in order to maximize profits. What is the best response of firm 1 if firm 2 chooses an output level of 200? (input a whole number:) The best response function of firm 1 with respect to firm 2's quantity choice takes the form: q 1 ( q 2 ) = w ∗ ( x − y ∗ q 2 − z ) where (w,x,y,z) are parameters of the problem. Solve for this best response function and provide the product (w*x*y*z) in the next blank: What is the Nash Equilibrium quantity produced by firm 1? (round to the nearest whole number)
- Solve for the Bertrand equilibrium for the firms described in Problem 32 if both firms have a marginal cost of $0 per unit. Problem 32 Suppose that identical duopoly firms have constant marginal costs of $10 per unit. Firm 1 faces a demand function of where is Firm 1’s output, is Firm 1’s price, and is Firm 2’s price. Similarly, the demand Firm 2 faces is Solve for the Bertrand equilibrium. CConsider an industry with only two firms: firm A and firm B. The industry’s inverse demand is P(Q) = 400 − 1/10Q where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are no fixed costs and no barriers to exit the market. Suppose the two firms engage in Stackelberg competition, with firm A moving first, and firm B moving second. Find the equilibrium price in the industry, the equilibrium outputs, as well as the profits for each firmConsider a duopoly where firms compete for market share by setting prices. The firms produce differentiated products and face the following demand functions where q is output and P is the price in dollars. q1 = 100 – 2P1 + 2P2 Demand Function for Firm 1 q2 = 120 – 4P2 + P1 Demand Function for Firm 2 Suppose that firm 1 is able to produce output at a constant marginal cost of $30 and that firm 2 is able to produce output at a constant marginal cost of $20. Both firms operate with no fixed costs. Derive the best response function for firm 1. Derive the best response function for firm 2.
- You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P = 5,900 − Q, and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high-powered computers and has found a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact…A community's demand for monthly subscription to a streaming music service is shown by the following table. Assume that there are only two firms serving this market (Firm A and Firm B), each firm offers the same quality of service and music selection, and that each firm’s marginal cost is constant and equal to 0 (zero). (please refer to table provided) If this market were highly competitive instead of a duopoly, the quantity of streaming movie subscriptions purchased each month would be ______ If the two firms agreed to each supply one half of the quantity a monopoly would supply, the contract would specify that each firm would supply ____. The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the firms independently produces a quantity of output, and these quantities are then sold in the market at a price that is determined by the total amount produced by the two firms. Firm 2 is known to have a cost advantage over firm 1. A recent study found that the (inverse) market demand curve faced by the two firms is P = 280 – 2(Q1 + Q2), and costs are C1(Q1) = 3Q1 and C2(Q2) = 2Q2. a. Determine the marginal revenue for each firm. b. Determine the reaction function for each firm.
- Q. Three firms operate in a market with a Demand function p = 169 - 2Q. All three firms have identical Cost functions: TC = 1200 - 95q + 2q2.i) Given that the firms are able to collude, what is the equilibrium market price and output?ii) If all of the firms cheat and each increases output by two units, what would be the new equilibrium price and the impact on an individual firm’s profits?Two identical firms currently serve a market. Each has a cost function of C(q) = 30q. Market demand is P(Q) = 80 − 0.01Q. The firms compete by setting prices simultaneously as in Bertrand competition. Let PB represent the equilibrium Bertrand duopoly price.The firms have proposed to merge, and they announce that this merger will result in considerable cost savings. The firms’ new cost function will have the form Cm(q) = cq + 100, 000. Note that the merged firm has positive fixed costs while the unmerged firms do not. (a) What is the merged firm’s profit-maximizing price if the merger is approved? Is it possible for the cost savings (via c < PB) to be sufficiently large for the merged firms’ profit-maximizing price to be below the duopoly equilibrium price? (b) Suppose that the Department of Justice permits the merger with the requirement that the new (post-merger) price must be no greater than the pre-merger price. Under what circumstances are the firms willing to go through with…Two firms compete by choosing price. Their demand functions are: Q1 = 20 -P1 +P2 and Q2 = 20 - P1 + P2 where P1 and P2 are the prices charged by each firm, respectively, and Q1 and Q2 are the resulting demands. Note that the demand for each good depends only on the difference in prices; if the two firms colluded and set the same price, they could make that price as high as they wanted and earn infinite profits. Marginal costs are zero.a. Suppose the two firms set their prices at the same time. Find the resulting Nash equilibrium. What price will each firm charge, how much will it sell, and what will its profit be? (Hint: Maximize the profit of each firm with respect to its price.) {15 Marks}b. Suppose Firm 1 sets its price first and then Firm 2 sets its price. What price will each firm charge, how much will it sell, and what will its profit be? {10 Marks}c. Suppose you are one of these firms and that there are three ways you could play the game: (i) Both firms set price at the same…