Consider Firm A and Firm B, each with cost functions C(qA) = 5qA, and C(qB) = 5qB, The inverse market demand is given by p = 30 − Q, where Q = qA + qB represents the total quantity demanded in the market.a) Suppose the firms compete in a Cournot oligopoly model. What are the quantities supplied by each firm and their profits?b) Now let Firm A be the first-mover. If the firms compete in a Stackelberg oligopoly model, what are the quantities supplied by each firm and their profits?c) How can you interpret the difference in profits between parts (a) and (b)? In other words, if you were Firm A, which scenario would you prefer, and what might this say in general? Consider Firm A and Firm B, each with cost functions Cqa) = 59a, and Cqe) = 5q5,respectively. The inverse market demand is given by p = 30 - Q, where Q = qa + qsrepresents the total quantity demanded in the market.a) Suppose the firms compete in a Cournot oligopoly model. What are the quantitiessupplied by each firm and their profits?b) Now let Firm A be the first-mover. If the firms compete in a Stackelberg oligopolymodel, what are the quantities supplied by each firm and their profits?c) How can you interpret the difference in profits between parts (a) and (b)? In otherwords, if you were Firm A, which scenario would you prefer, and what might thissay in general?

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Answered: Consider Firm A and Firm B, each with…

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

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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Consider Firm A and Firm B, each with cost functions C(q_A) = 5q_A, and C(q_B) = 5q_B, The inverse market demand is given by p = 30 − Q, where Q = q_A + q_B represents the total quantity demanded in the market.

a) Suppose the firms compete in a Cournot oligopoly model. What are the quantities supplied by each firm and their profits?

b) Now let Firm A be the first-mover. If the firms compete in a Stackelberg oligopoly model, what are the quantities supplied by each firm and their profits?

c) How can you interpret the difference in profits between parts (a) and (b)? In other words, if you were Firm A, which scenario would you prefer, and what might this say in general?

Consider Firm A and Firm B, each with cost functions Cqa) = 59a, and Cqe) = 5q5,
respectively. The inverse market demand is given by p = 30 - Q, where Q = qa + qs
represents the total quantity demanded in the market.
a) Suppose the firms compete in a Cournot oligopoly model. What are the quantities
supplied by each firm and their profits?
b) Now let Firm A be the first-mover. If the firms compete in a Stackelberg oligopoly
model, what are the quantities supplied by each firm and their profits?
c) How can you interpret the difference in profits between parts (a) and (b)? In other
words, if you were Firm A, which scenario would you prefer, and what might this
say in general?

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