The agricultural sector has been impacted by industry concentration more than most. Suppose that there are only bwo firms producing an agricltural commodity. The firms use different inputs so that they have differentiated products. Thus, cach firm has some "market power." Specifically, the demands for the two firms' products are given by: Q, = 50 – 4PA+ PB and QB = 40 -6Pg+2PA where P denotes the price charged by Firm i and Q denotes the resulting quantity that will be purchased from Firm i Each firm can produce as many units as it chooses, costlessly, ie., production cost is zero. The firms compete with one another via pricr each firm chooses a price to charge, taking as given the price the other firm is charging Determine the equilibrium prices and quantities and caleulate the profit of cach firm.

The agricultural sector has been impacted by industry concentration more than most. Suppose that there are only bwo firms producing an agricltural commodity. The firms use different inputs so that they have differentiated products. Thus, cach firm has some "market power." Specifically, the demands for the two firms' products are given by: Q, = 50 – 4PA+ PB and QB = 40 -6Pg+2PA where P denotes the price charged by Firm i and Q denotes the resulting quantity that will be purchased from Firm i Each firm can produce as many units as it chooses, costlessly, ie., production cost is zero. The firms compete with one another via pricr each firm chooses a price to charge, taking as given the price the other firm is charging Determine the equilibrium prices and quantities and caleulate the profit of cach firm.

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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