Gamma and Zeta are the only two widget manufacturers in the world. Each firm has a cost function given by: C(q)- 10+10q+q², where a is number of widgets produced. The market demand for widgets is represented by the inverse demand equation: P-100-Q where Q- q1+q2 is total output. Suppose that each firm maximizes its profits taking its rival's output as given (i.e. the firms behave as Cournot oligopolists). a) What will be the equilibrium quantity selected by each firm? What is the market price? What is the profit level for each firm?
Gamma and Zeta are the only two widget manufacturers in the world. Each firm has a cost function given by: C(q)- 10+10q+q², where a is number of widgets produced. The market demand for widgets is represented by the inverse demand equation: P-100-Q where Q- q1+q2 is total output. Suppose that each firm maximizes its profits taking its rival's output as given (i.e. the firms behave as Cournot oligopolists). a) What will be the equilibrium quantity selected by each firm? What is the market price? What is the profit level for each firm?
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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