Problem 1 - Duopoly ModelsTwo firms produce a homogeneous product. Let p denote the product's price.The output level of firm 1 is denoted by q1, and the output level of firm 2 by92. The aggregate industry output is denoted by Q = 41 + 92. The aggregateindustry demand curve for this product is given byр 3 200— 4QAssume that the marginal and average cost for each firm is MC = AC = 20.(a)Solve for the Cournot (Nash) equilibrium. Find the output level ofeach firm and the market price.(Ь)Solve for the Bertrand (Nash) equilibrium. Find the output level ofeach firm and the market price.(c)Solve for the Stackelberg (sequential-moves) equilibrium where firmone chooses quantity in the first stage and firm 2 chooses quantityin the second stage. Find the output of each firm and the marketprice.

The equilibrium price(P) and quantity(Q) can be estimated by using the following steps: First: Find…

Problem 1 - Duopoly Models Two firms produce a homogeneous product. Let p denote the product's price. The output level of firm 1 is denoted by q1, and the output level of firm 2 by 42. The aggregate industry output is denoted by Q = 41 + 92. The aggregate industry demand curve for this product is given by р 3 200- 4Q Assume that the marginal and average cost for each firm is MC = AC = 20. %3D

Problem 1 - Duopoly Models Two firms produce a homogeneous product. Let p denote the product's price. The output level of firm 1 is denoted by q1, and the output level of firm 2 by 42. The aggregate industry output is denoted by Q = 41 + 92. The aggregate industry demand curve for this product is given by р 3 200- 4Q Assume that the marginal and average cost for each firm is MC = AC = 20. %3D

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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The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (e) The resulting deadweight loss from River Company operating as a monopoly?
The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (c) The output? (d) Total profit?
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