they share the market equally. Costs are given by (g) = 16g. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses p₁= 25. Firm 2's best response is to set what price? 24 b) If Firm 2 chooses the price determined in the previous question. Firm 1's best response is to choose what price? 23 If Firm 1 chooses P₁ = 12. Firm 2's best response is a range of prices. What is the lowest price in this range? 16 5) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 34 units, and Firm 2 can produce at most 42 units. If firms set different prices, consumers will first buy from the firm charging the lower price. Once that firm's supply is exhausted, consumers will buy from the firm charging the higher price until that firm's supply is exhausted. What is Firm 1's equilibrium profit? 816

they share the market equally. Costs are given by (g) = 16g. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses p₁= 25. Firm 2's best response is to set what price? 24 b) If Firm 2 chooses the price determined in the previous question. Firm 1's best response is to choose what price? 23 If Firm 1 chooses P₁ = 12. Firm 2's best response is a range of prices. What is the lowest price in this range? 16 5) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 34 units, and Firm 2 can produce at most 42 units. If firms set different prices, consumers will first buy from the firm charging the lower price. Once that firm's supply is exhausted, consumers will buy from the firm charging the higher price until that firm's supply is exhausted. What is Firm 1's equilibrium profit? 816

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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Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by C; (qi) = 16q¡ . Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Could you help me with these questions? a) If Firm 1 chooses Pi price? = 32, Firm 2's best response is to set what b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses p₁ = 9, Firm 2's best response is a range of prices. What is the lowest price in this range?
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