Consider the Cournot-Stackelberg competing islands of Penang and Grenada discussed in the previous problem. (The inverse demand function remains P-100-qp - 9G-) a. Suppose Grenada's cost of production falls to $16, while Penang's remains at $20. Grenada's function will now be ga = 42-0.5qp, and Penang's will be qp = 40-0.5gg. Specify the two islands' equilibrium output levels. 9G= 19 9G = Incorrect qp= 38 b. Suppose Grenada's cost of production remains at $20, while Penang's falls to $16. Grenada's reaction function will now 40-0.5qp, and Penang's will be qp = be qa = 42-0.5gg. Specify the two islands' equilibrium output levels. 19 qp= Incorrect. 23 c. Grenada has a first-mover advantage in part a but not part b, since in the latter case, the cost advantage of Penang overwhelms Grenada's first-mover advantage. True False

Consider the Cournot-Stackelberg competing islands of Penang and Grenada discussed in the previous problem. (The inverse demand function remains P-100-qp - 9G-) a. Suppose Grenada's cost of production falls to $16, while Penang's remains at $20. Grenada's function will now be ga = 42-0.5qp, and Penang's will be qp = 40-0.5gg. Specify the two islands' equilibrium output levels. 9G= 19 9G = Incorrect qp= 38 b. Suppose Grenada's cost of production remains at $20, while Penang's falls to $16. Grenada's reaction function will now 40-0.5qp, and Penang's will be qp = be qa = 42-0.5gg. Specify the two islands' equilibrium output levels. 19 qp= Incorrect. 23 c. Grenada has a first-mover advantage in part a but not part b, since in the latter case, the cost advantage of Penang overwhelms Grenada's first-mover advantage. True False

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Monopoly

Section: Chapter Questions

Problem 12SQP

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