The inverse demand function in an industry with two firms is given as p = 50 – 2y, where y is the industry demand and p is the price. The firms have different technologies at their production plants with costs given as c1(yı) = 10y; and c2(2) = 14y2, where y = y,+ y2. 1. Assuming the firms are Cournot duopolists, find the equilibrium price, quantity and profit for each firm (if needed, have 2 digits after decimal point). 2. Assuming the firms act as a Stackelberg leader and follower, with firm 1 as the leader, find the equilibrium price, quantity and profit for each firm. 3. If the firms merge into one firm and become a monopoly in the industry, what will be the output of the merged firm? Comment on what would happen to the production plants under one ownership. Find the equilibrium price and profit.

The inverse demand function in an industry with two firms is given as p = 50 – 2y, where y is the industry demand and p is the price. The firms have different technologies at their production plants with costs given as c1(yı) = 10y; and c2(2) = 14y2, where y = y,+ y2. 1. Assuming the firms are Cournot duopolists, find the equilibrium price, quantity and profit for each firm (if needed, have 2 digits after decimal point). 2. Assuming the firms act as a Stackelberg leader and follower, with firm 1 as the leader, find the equilibrium price, quantity and profit for each firm. 3. If the firms merge into one firm and become a monopoly in the industry, what will be the output of the merged firm? Comment on what would happen to the production plants under one ownership. Find the equilibrium price and profit.

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 2E

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