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Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q= 25 - P, where Q is the fotal quantity produced. Firm 1's marginal cost is C=3 Firm 2's marginal cost of production is C=4 with probability 0.3 and c =2 with probability 0.7. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost Firm 2 faces low production cost. Assuming that all firms behave optimally, the market clearing price is O 15 1 9.9 O 82 O 21.1

Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q= 25 - P, where Q is the fotal quantity produced. Firm 1's marginal cost is C=3 Firm 2's marginal cost of production is C=4 with probability 0.3 and c =2 with probability 0.7. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost Firm 2 faces low production cost. Assuming that all firms behave optimally, the market clearing price is O 15 1 9.9 O 82 O 21.1

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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QUESTION 14 Consider the following Cournot duopoly. Both firms produce a homogenous good The demand function is Q = 25- P, where Q is the total quantity produced Firm 1's marginal cost IS is C =3 Firm 2's marginal cost of production is c = 4 with probability 0.3 and c =2 with probability 0.7. Firm 2 knows its own cost function and firm 1's cost function Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost Firm 2 faces low production cost. Assuming that all firms behave optimally, the market clearing price is O 15.1 O 9 O82 O 21.1 QUESTION 15 Consider the following Cournot duopoly Both firms produce a homogenous good The demand function is0 = 100 -2P. where Q is the total quantity produced. Firm 1's cost fulaction is TC(q,) =59, +1 Firm 2's cost function is TC(q,) = 6g, with probability 0,5 and TC(g,) = 39, with probability 0.5 Firm 2 knows its own cost function and firm 1's cost function Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the best response function of firm 2, if its marginal cost is low (i.e, it is equal to 3)? 88 - 91 O 92 = 44-91 O 92 2. 47 -91 O 92 = 94-91 O 92
Transcribed Image Text:QUESTION 14 Consider the following Cournot duopoly. Both firms produce a homogenous good The demand function is Q = 25- P, where Q is the total quantity produced Firm 1's marginal cost IS is C =3 Firm 2's marginal cost of production is c = 4 with probability 0.3 and c =2 with probability 0.7. Firm 2 knows its own cost function and firm 1's cost function Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost Firm 2 faces low production cost. Assuming that all firms behave optimally, the market clearing price is O 15.1 O 9 O82 O 21.1 QUESTION 15 Consider the following Cournot duopoly Both firms produce a homogenous good The demand function is0 = 100 -2P. where Q is the total quantity produced. Firm 1's cost fulaction is TC(q,) =59, +1 Firm 2's cost function is TC(q,) = 6g, with probability 0,5 and TC(g,) = 39, with probability 0.5 Firm 2 knows its own cost function and firm 1's cost function Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the best response function of firm 2, if its marginal cost is low (i.e, it is equal to 3)? 88 - 91 O 92 = 44-91 O 92 2. 47 -91 O 92 = 94-91 O 92
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