) Suppose that two identical firms produce widgets and that they are the only firm: the market. Their costs are given by C₁ = 60Q₁ and C₂ = 60Q2, where Q₁ is the itput of Firm 1 and Q₂ is the output of Firm 2. Price is determined by the followin mand curve: = 300 - Q here Q=Q₁+Q₂ a. Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium. b. Suppose the two firms form a cartel to maximize joint profits. How many widgets will be produced? Calculate each firm's profit. c. Suppose Firm 1 were the only firm in the industry. How would market outpu and Firm 1's profit differ from that found in part (b) above? d. Returning to the duopoly of part (b), suppose Firm 1 abides by the agreemen but Firm 2 cheats by increasing production. How many widgets will Firm 2 produco? What will be noh firm's profi+2
) Suppose that two identical firms produce widgets and that they are the only firm: the market. Their costs are given by C₁ = 60Q₁ and C₂ = 60Q2, where Q₁ is the itput of Firm 1 and Q₂ is the output of Firm 2. Price is determined by the followin mand curve: = 300 - Q here Q=Q₁+Q₂ a. Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium. b. Suppose the two firms form a cartel to maximize joint profits. How many widgets will be produced? Calculate each firm's profit. c. Suppose Firm 1 were the only firm in the industry. How would market outpu and Firm 1's profit differ from that found in part (b) above? d. Returning to the duopoly of part (b), suppose Firm 1 abides by the agreemen but Firm 2 cheats by increasing production. How many widgets will Firm 2 produco? What will be noh firm's profi+2
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 1E
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