The inverse demand for tea is given by P= 8 – 0.03Q, where Pis the price per a gram of tea and Q is the total number of grams of tea brought to market. There are two tea shops in the market. Shop 1's cost function is given by C = 0.02q,², where q, is the number of grams of tea it brings to market. Shop 2's cost function is given by C2 = 0.02q2², where q2 is the number of grams of tea it brings to market. Given that the two shops compete by setting output (Cournot), answer the following. a) Identify shop 1's reaction function to shop 2's output to within 2 decimal places (e.g. 0.33). 91= Number - Number 92 b) Identify shop 2's reaction function to shop 1's output to within 2 decimal places (e.g. 0.71). q2= Number Number 91 c) To within two decimal places (e.g. 0.63) what is the equilibrium output level of each shop and the equilibrium per gram price for tea. Shop 1 will produce Number grams of tea and shop 2 will produce Number grams of tea. The equilibrium market price is £ Number

The inverse demand for tea is given by P= 8 – 0.03Q, where Pis the price per a gram of tea and Q is the total number of grams of tea brought to market. There are two tea shops in the market. Shop 1's cost function is given by C = 0.02q,², where q, is the number of grams of tea it brings to market. Shop 2's cost function is given by C2 = 0.02q2², where q2 is the number of grams of tea it brings to market. Given that the two shops compete by setting output (Cournot), answer the following. a) Identify shop 1's reaction function to shop 2's output to within 2 decimal places (e.g. 0.33). 91= Number - Number 92 b) Identify shop 2's reaction function to shop 1's output to within 2 decimal places (e.g. 0.71). q2= Number Number 91 c) To within two decimal places (e.g. 0.63) what is the equilibrium output level of each shop and the equilibrium per gram price for tea. Shop 1 will produce Number grams of tea and shop 2 will produce Number grams of tea. The equilibrium market price is £ Number

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.4P

See similar textbooks

Similar questions

Best Orange Juice Company is located in Oman. The cost function for total orange juice production (x) is given by C(q) = 0.25x2. Their orange juice is demanded only in Muscat (Muscat demand is xm= 100-2Pm) and Salalah (Salalah demand is xs= 100-4Ps). Therefore, the total demand is x=xm+ xs. If the company can control the quantities supplied to each market, how many should it sell in each location to maximize total profits? What price would it charge in each location?
A firm has a linear demand function for it's product.When the price of the product is sh.20,the quantity demanded is 40 units.When the price increases to sh.240 the quantity demanded becomes 30 units.In addition,the firm's marginal cost function is giving by: Mc = 40q- 2q^2+2 Fixed cost = 5 million Where q= quantity demanded,Mc = marginal cost(sh.million) Required 1.The level of output that maximises profits 2.The maximum profit 3.The price of the product at the maximum profit
The demand function for small high-definition televisions is given by p = 9,000 − 55x, where p is the price, in dollars, that x televisions can be sold. The cost function (in dollars) to produce televisions is C = 3,500x + 2,000. (Simplify your answers completely.) (a)Find the revenue function, R. R = (b)Find the profit function, P. P = (c)Find how many televisions should be sold to maximize profit. televisions (d)What is the maximum profit (in dollars)? $
A company manufacturing laundry sinks has fixed costs of $100 per day but has total costs of $2,500 per day when producing 15 sinks. The company has a daily demand function of q = 360 − p, where q is the number if laundry sinks demanded and p is te price of a laundry sink. (b) Find a function for the average cost of this company?
A firm's demand and total cost function are given by the expression: P = 20 - Q/2 (1) TC = 0.5Q2 + 36 (2) Where P is price per unit in £ TC = total cost in £ Q is quantity demanded and produced. Find the profit-maximising level of output using the profit function and calculate how much profit is made at this output level.
Suppose the (inverse) demand for a firm’s product is given by P = 10−2Q and the cost function is C(Q) = 2Q What is the profit-maximizing level of output and price for this firm?
A company manufacturing laundry sinks has fixed costs of $100 per day but has total costs of $2,500 per day when producing 15 sinks. The company has a daily demand function of q = 360 − p, where q is the number if laundry sinks demanded and p is te price of a laundry sink. (d) How many laundry sinks will the company need to produce in order to maximise it′s profits?
Would a cost function of 0 mean a linear line of supply curve? For example if 10 firms are on the market selling 10 goods and the cost function is 0?
A manufacturer of upholstery can sell 2121 yards of fabric at a price of $3.11$⁢3.11 per yard. If the price is $1.85$⁢1.85, she can sell 3535 yards. The total cost of manufacturing x yards of fabric is C(x)=0.6x+36C(x)=0.6x+36 dollars. Step 1 of 3 : Assuming the demand function is linear, find an equation for D(x)D(x). Do not round your answer.
*** Please answer e, f, g,h** An ice cream company finds that at a price of $4.00 for each pint, they can sell 4000 pints of ice cream per day. For every $0.25 decrease in price, daily demand increases by 200 units. The company’s cost function is C(q)=0.01q2-90q+211600, where C represents their daily costs (in dollars), and q is the number of pints sold per day. a)Find the demand function q(p). b) Find the revenue function R(q). Hint: first you will need to solve for p in terms of q from the demand function.) c) How many pints should the company sell per day if they want to maximize their revenue? d) what price should the company charge for each pint if they want to maximize their revenue? e)Use the criteria MC(q)=MR(q) to determine how many pints the company should sell per day if they want to maximize their profit. f)What is the maximum profit the company can earn per day? g)Find the average cost function. h)How many pints should the company sell per day if they want to minimize…
Suppose that the manager of a firm operating in a competitive market has estimated the firm’s average variable cost function to be AVC = 10 – 0.03Q + 0.00005Q2, TFC = 60. What is the MC function? What is the output where AVC is minimum? What is the optimum profit?
A shop which sells T-shirts has a demand function and a total cost function given by the equations P = 240 − 10Q and TC = 120 + 8Q (a) Write down the equations for TR and profit. (b) Calculate the number of T-shirts which must be sold to maximize (i) profit, (ii) total revenue. (c) Write down the equations for MR and MC.