In the market of a homogeneous product, two companies, A and B, produce with same technology. The total cost function of company i is C (qi) = 10 + 25qi, where i = A, B. The inverse demand function for the good is given by equation P = 100- (qA+qB), where Q=qA+qB. a) Assuming that companies choose their quantities at the same time, yes calculate the market price and determine the profits of the business and the consumer surplus. b) If the two companies set their prices at the same time, instead of the quantities, to calculate the market equilibrium price and determine the profits of each business and consumer surplus.

In the market of a homogeneous product, two companies, A and B, produce with same technology. The total cost function of company i is C (qi) = 10 + 25qi, where i = A, B. The inverse demand function for the good is given by equation P = 100- (qA+qB), where Q=qA+qB. a) Assuming that companies choose their quantities at the same time, yes calculate the market price and determine the profits of the business and the consumer surplus. b) If the two companies set their prices at the same time, instead of the quantities, to calculate the market equilibrium price and determine the profits of each business and consumer surplus.

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

Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition

Section: Chapter Questions

Problem 9E

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