In a duopoly market, two firms produce the identical products, the cost function of firm 1 is: C, = 20q1, the cost function of firm 2 is: C2 2Q, here Q = q1 :20q2, the market demand function is: P = 500 – + 92. In a Bertrand model, the two firms set their price simultaneously, assume both firms do not have production capacity limits, and there is no collusion. What is the market equilibrium price and quantity? If the two firms decide to form a Cartel, i.e. they want to maximize the profit of the whole industry, and then split the production and profit evenly. What is the market price? What is the industry's total quantity produced? What is the quantity produced and profit of each firm? If firm 1 will produce at the production level from (b) for sure, what is firm 2's optimal production decision? What is firm 2's maximum profit?

In a duopoly market, two firms produce the identical products, the cost function of firm 1 is: C, = 20q1, the cost function of firm 2 is: C2 2Q, here Q = q1 :20q2, the market demand function is: P = 500 – + 92. In a Bertrand model, the two firms set their price simultaneously, assume both firms do not have production capacity limits, and there is no collusion. What is the market equilibrium price and quantity? If the two firms decide to form a Cartel, i.e. they want to maximize the profit of the whole industry, and then split the production and profit evenly. What is the market price? What is the industry's total quantity produced? What is the quantity produced and profit of each firm? If firm 1 will produce at the production level from (b) for sure, what is firm 2's optimal production decision? What is firm 2's maximum profit?

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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