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Economics
![[Q: 14-9565535] A duopoly faces an inverse market demand of P(Q) = 120 - Q. Firm 1 has a constant marginal cost of MC₁ (9₁) = $30.
Firm 2's constant marginal cost is MC₂ (92) = $60. Assume fixed costs are negligible for both firms. Calculate the output of each firm,
market output, and price if there is (A) a collusive equilibrium or (B) a Cournot equilibrium.
(A) Collusive equilibrium (Enter your responses rounded to two decimal places)
The collusive equilibrium occurs where q₁ equals and 92 equals
Market output is
The collusive equilibrium price is $
(B) Cournot equilibrium (Enter your responses using rounded to two decimal places)
The Nash-Cournot equilibrium occurs where q₁ equals and 92 equals
Market output is
The equilibrium occurs at a price of $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01d01b29-ede7-42ba-8dcd-8c0b18e94cc8%2Fe8d608a5-1230-4666-ab12-9e21ccce5d63%2F2qjysil_processed.png&w=3840&q=75)
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- A common characteristic of oligopolies is a. interdependence in pricing decisions. b. independent pricing decisions. c. low industry concentration. d. few or no plant-level economies of scale.A duopoly faces an inverse market demand of P(Q) = 240−Q.Firm 1 has a constant marginal cost of MC1 (q1) = $10.Firm 2's constant marginal cost is MC2 (q2) = $20.Assume fixed costs are negligible for both firms. Calculate the output of each firm, market output, and price if there is (A) a collusive equilibrium or (B) a Cournot equilibrium. (A) Collusive equilibrium (Enter your responses rounded to two decimal places) The collusive equilibrium occurs where q1 equals ?and q2 equals ? Market output is ? The collusive equilibrium price is ? (B) Cournot equilibrium (Enter your responses using rounded to two decimal places) The Nash-Cournot equilibrium occurs where q1 equals ? and q2 equals ? Market output is ? The equilibrium occurs at a price of ?A duopoly faces an inverse market demand of P(Q) = 150−Q.Firm 1 has a constant marginal cost of MC1 (q1) = $30.Firm 2's constant marginal cost is MC2 (q2) = $60.Assume fixed costs are negligible for both firms. Calculate the output of each firm, market output, and price if there is (A) a collusive equilibrium or (B) a Cournot equilibrium. (A) Collusive equilibrium (Enter your responses rounded to two decimal places) The collusive equilibrium occurs where q1 equals ?and q2 equals ? Market output is ? The collusive equilibrium price is ? (B) Cournot equilibrium (Enter your responses using rounded to two decimal places) The Nash-Cournot equilibrium occurs where q1 equals ? and q2 equals ? Market output is ? The equilibrium occurs at a price of ?
- Two identical firms currently serve a market. Each has a cost function of C(q) = 30q. Market demand is P(Q) = 80 − 0.01Q. The firms compete by setting prices simultaneously as in Bertrand competition. Let PB represent the equilibrium Bertrand duopoly price.The firms have proposed to merge, and they announce that this merger will result in considerable cost savings. The firms’ new cost function will have the form Cm(q) = cq + 100, 000. Note that the merged firm has positive fixed costs while the unmerged firms do not. (a) What is the merged firm’s profit-maximizing price if the merger is approved? Is it possible for the cost savings (via c < PB) to be sufficiently large for the merged firms’ profit-maximizing price to be below the duopoly equilibrium price? (b) Suppose that the Department of Justice permits the merger with the requirement that the new (post-merger) price must be no greater than the pre-merger price. Under what circumstances are the firms willing to go through with…The market demand in a homogeneous-product Cournot duopoly is P = 100 - 2Q, where Q=Q1+Q2 (Firm 1 and Firm 2), and the costs functions for each firms are: TC1 = 12Q1 and TC2 = 20Q2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Complete the following table. Q1 Q2 P Profits F1 Profits F2 Duopoly competition CollusionThe market demand curve faced by Stackelerg duopolies is: Qd = 12,000 - 5P where Qd is the market quantity demanded and P is the commodity's price in dollars. Firm A's marginal cost is: MCa = 0.08qa where MCa is Firm A's marginal cost in dollars and qa is the quantity of output produced by Firm A. Firm B's marginal cost equation is: MCb = 0.1qb where MCb is Firm B's marginal cost in dollars and qb is the quantity of output produced by Firm B. Because of Firm A's lower marginal cost, Firm B has conceded the power to move first to Firm A. a. Given Firm B will move second, what is the equation for Firm B's reaction function with qb expressed as a function of qa? b. Given Firm A can move first, what quantity of output will Firm A produce? c. What quantity of output will firm B produce? What price will be established for the commodity?
- Consider a duopoly where firms compete in prices and firms do not have any capacity constraints. Market demand is P(Q)=45-4Q, and each firm faces a marginal cost of $9 per unit. How much is each firm's total variable cost if firms equally divide the market at Nash equilibrium?Suppose that two duopolists (firm A and Firm B) produce identical products. The firms face the following market demand curve P=1250-Q Where Q = Total output in the duopoly market Qa= Firm A’s output Qb = Firm B’s output P = Price in the duopoly market Firm A and Firm B make output decisions sequentially. Firm A is the leading firm that makes the first move, and firm B is the following firm. Firm A rationally anticipates the output reaction of Firm B, as Firm A has the prior knowledge of Firm B’s output-reaction curve, which is Qb = 600-0.5Qa It is assumed that firm B always acts in the same manner. Both firms have constant marginal costs (MC) of production where MCa=MCb=$50. Fixed Costs are nil because expenses have already been fully amortised In this duopoly market, equilibrium level of output is __________, and equilibrium level of price is ___________Suppose the inverse demand function for two firms in a homogeneous-product Stackelberg oligopoly is given by P = 50 − (Q1+Q2) and cost functions for the two firms are C1(Q1) = 2Q1 C2(Q2) = 2Q2 Firm 1 is the leader, and firm 2 is the follower.1. What is firm 2’s reaction function?2. What is firm 1’s output?3. What is firm 2’s output?4. What is the market price?
- In a homogeneous products duopoly, each firm has a marginal cost curve MC= 10, i= 1,2. The market inverse demand curve is P= 50−Q, where Q = Q1+Q2. a) What would be the equilibrium price in this market if firms acted as price-taking firms? b) What would be the equilibrium price in this market if the two firms acted as a profit-maximizing cartel? Obtain the Lerner index c) What would be the Cournot equilibrium quantities, price and profit in this market? Obtain the Lerner index of each firm and compare it to b)Consider an industry that consists of 4 firms, all competing over the same market, given by the following demand equation: P=80-3Q All firms have the same Total Cost Function, given by: TC₁=10q,+2q Suppose the firms decide to collude and voluntarily restrict output and raise price, in order to increase profits. a) What price will be charged by the members of the cartel? Assume the head of the cartel is fair and distributes output q, equally among the 4 firms (since they have identical costs). b)What is the output of each individual firm? c) What is each individual firm's profit? We know that there is a built-in incentive for cartel members to cheat on the cartel. If, as a result, the cartel breaks down: d) What price will be charged in the market? e) Assuming each firm captures an equal share of the market, what now is each firm's output, q? f) What now is individual firm profit? g) Illustrate your answerBoulder has several ski and snowboard retailers that sell similar brands. Prices across these retails are relatively stable during preseason (ski/snowboard season) and midseason, but become volatile postseason. For the past few years, when one retailer slashed prices (especially postseason), other retailers followed suit. All retailers behave as oligopolists. Suppose that retailer A faces an inverse demand of p = 1,500 – 1.5Q, when the other retailers match retailer A’s price changes, and p=1200 – 0.7Q, when the other retailers don't match retailer A’s price changes. Suppose also that retailer A's cost function is C(Q) = 20,000 + 10Q + 0.8Q2. Question: Under these conditions, what is the most profit retailer A can make?
