Consider a single country and a single good. The demand curve for this good is given by QD = 144 - 4P. There are two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B has a marginal cost of $16. There are no fixed costs incurred by either firm. Firm A produces 16 units and firm B produces 32 units. The equilibrium price is $24. Total Profit for Firm A = $64 Total Profit for Firm B = $256 Assume that these firms compete in Cournot fashion. What is the consumer surplus? Show your work.
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Consider a single country and a single good. The
are two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B has
a marginal cost of $16. There are no fixed costs incurred by either firm.
Firm A produces 16 units and firm B produces 32 units.
The
Total Profit for Firm A = $64
Total Profit for Firm B = $256
Assume that these firms compete in Cournot fashion.
What is the
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- Consider a single country and a single good. The demand curve for this good is given by QD = 144 - 4P. Thereare two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B hasa marginal cost of $16. There are no fixed costs incurred by either firm. Assume that these firms compete in Cournot fashion. Part I. How many units of output each firm produces? Show your work. Part II. What is the equilibrium price in the market? Show your work.Part III. How much profit each firm makes? Show your work. Part IV. What is the consumer surplus? Show your work.Consider a single country and a single good. The demand curve for this good is given by QD = 144 - 4P. Thereare two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B hasa marginal cost of $16. There are no fixed costs incurred by either firm. Assume that these firms compete in Bertrand fashion. Part I. What is the equilibrium price in the market? Explain your reasoning. Part II. How many units of output each firm produces? Show your work. Part III. How much profit each firm makes? Show your work. Part IV. What is the consumer surplus? Show your work.Consider a single country and a single good. The demand curve for this good is given by QD = 144 - 4P. Thereare two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B hasa marginal cost of $16. There are no fixed costs incurred by either firm. Assume that these firms compete in Bertrand fashion. Part V. What is the equilibrium price in the market now? Explain your reasoning. Part VI. How many units of output each firm produces? Show your work. Part VII. How much profit each firm makes now? Show your work. Part VIII. What is the consumer surplus? Show your work. Part IX. Under which competition, Cournot vs. Bertrand, social welfare is higher? Show your work.
- Two firms sell an identical product in a market by setting prices simultaneously. Consumers buy from the firm that offers the lower price; if the prices are identical, the firms split the demand. If ? is the lowest price (in dollars), aggregate demand is ? = 250 − ?. Suppose prices can only be set in increments of 1 cent. (a) Suppose Firm 1 and Firm 2 have limited production capacities of 40 units each. The marginal cost of firm 1 is $35 and the marginal cost of firm 2 is $25. If Firm 1 believes that Firm 2 will set a price of $30, what price should Firm 1 set? Show your work. (Assume efficient rationing while calculating firm’s residual demand.) (b) Ignore the information in part (a). Suppose each firm has unlimited capacity, but that the marginal costs of Firm 1 and Firm 2 are $40 and $150 respectively. Do ?1 = 149.99 and ?2 = 150 satisfy the requirements of a Nash equilibrium? Explain why. You must explain why a strategy is a best response or not to the other strategy.Two firms, Incumbent & Entrant, can produce the same good. The market demand for the good is given by P = 180 – Q, where P is the market price and Q is the market quantity demanded. The firms must pay w = 45 per unit of output for labour and r = 45 per unit of output for capital (one unit of capital is used per unit of output), but Incumbent may choose capacity KI units of capital before Entrant decides whether to enter the market. Suppose firms each have fixed costs FI =600, FE=500. Incumbent chooses (as a Stackelberg leader) capacity KI equal to the monopoly profit- maximizing quantity. When you answer the following questions, show your work. a. Would Incumbent be able to prevent entry by choosing capacity KI equal to the monopoly profit-maximizing quantity? Explain. b. What is the Incumbent’s equilibrium choice of capacity KI in this Dixit game? c. Does the Incumbent’s choice of capacity KI in part (b) qualify as predatory conduct (here, limit output)? Explain.Consider a single country and a single good. The demand curve for this good is given by QD = 144 - 4P. Thereare two firms serving the market: Firm A and Firm B, where Firm A has a marginal cost of $20 and Firm B hasa marginal cost of $16. There are no fixed costs incurred by either firm. Under which competition, Cournot vs. Bertrand, social welfare is higher? Show your work.
- Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by C; (qi) = 16q¡ . Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Could you help me with these questions? a) If Firm 1 chooses Pi price? = 32, Firm 2's best response is to set what b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses p₁ = 9, Firm 2's best response is a range of prices. What is the lowest price in this range?Suppose that the world price of oil is roughly $100.00 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14 bb/yr from OPEC. Statistical studies have shown that the short−run price elasticity of demand for oil is −0.05, and the short−run competitive price elasticity of supply is 0.10. Using this information, derive linear demand and competitive supply curves for oil. Let the demand curve be of the general form Q=a−bP and the competitive supply curve be of the general form Q=c+dP, where a, b, c, and d are constants. The equation for the short−run demand curve is? The equation for the short−run competitive supply curve isTwo firms sells an identical product. The demand function for each firm is given: Q = 20 - P, where Q = q1 + q2 is the market demand and P is the price. The cost function for reach firm is given: TCi = 10 + 2qi for i = 1, 2. a) If these two firms collude and they want to maximize their combined profit, how much are the market equilibrium quantity and price? b) If these two firms decide their production simultaneously, how much does each firm produce? What is the market equilibrium price? c) If Firm 1 is a leader who decides the production level first and Firm 2 is a follower, how much does each firm produce? What is the market equilibrium price?
- The tables (below) show the willingness to pay by three (competitive) consumers for additional units of some good, and the marginal costs of three (competitive) firms that produce that good. a) Compute the competitive equilibrium quantity and price for this market. Also, compute each consumer's surplus and each firm's profits. b) Now suppose that you have access to the same technology (and competitive input markets) as that of Firm 3. Entering the market (that is, launching a fourth firm) means a fixed (yes, sunk too) cost of $10. Would you decide to enter? (Entry has effects on the market, of course.) c) With the same data, suppose that all three firms merge. That is, now a single corporation controls (and decides on output for) all three firms (now, plants of one single firm). Obtain the output (or, equivalently, the price) that this monopolistic corporation will choose, and evaluate the consequences for the consumers (that is, the effect on the consumer surplus) and for the profits…Three products compete in a market and their demand and supply functions are qd1 = 44-2p1+p2+p3 qs1 = -10+3p1 qd2 = 25+ p1 –p2 +3p3 qs2 = -15+5p2 qd3 = 40 +2p1+p2 -3p3 qs3 = -18+2p3 where p1, p2, and p3 are the prices. Determine the prices and quantities which result in equilibrium in each market using Cramer’s rule.The market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, where both quantities are measured in millions of gallons per year. What is the aggregate surplus at the competitive market equilibrium? Question 17 options: $4.5 million $9 million $13.5 million $27 million
