Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134643175
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 10E
(a)
To determine
The output, price, profit under cournot model.
(b)
To determine
The output, price, profit under collusion.
(b)
To determine
The output, price, profit under collusion.
(c)
To determine
The output, price, profit under collusion.
(d)
To determine
The output, price, profit when Firm 1 can decide the output first.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose the Boston to Philadelphia airline route is serviced by three airlines – US Airways (Firm A) and JetBlue (Firm B) and Continental (Firm C). The demand for airline travel between these two cities is Q = 150 – p. The cost function is C(Q) = 30Q. The cost function is the same for all three airlines.
Assume that the three airlines are making investments in airline capacity. In other words, they are simultaneously choosing quantity. (Cournot Competition)
Derive US Airways’ residual demand function given JetBlue’s output, qB, and Continental’s output, qC.
What is the Marginal Revenue for US Airways?
Derive US Airways reaction function
Derive the market equilibrium quantity, Q*, price, p*, and Profit.
Consider the following market demand function: Q= 20-2P, where P is the market price. Suppose there are two firms- A,B in the market and they have the same cost function: the per unit cost of producing output is 4. The firms compete by choosing quantities. Find the reaction functions for both the firms if they are maximizing profits. What is the profit maximizing output for each firm and corresponding market price? If there was only one firm in the market how would your answer change?
Pizza Hut and Dominoís are considering to open a shop in a new shopping precinct in Burwood.
Suppose both charge $10 for a pizza (price competition is ignored here), and the aggregate local demand for pizza at this price is Q: If both Örms open a shop in the shopping precinct, Q is shared equally between the two shops. On the other hand, if there is only one pizza shop in the shopping precinct, the total demand Q goes to that shop. The total cost function for Pizza Hut is
TC P(Q) = 5Q + 6000
and the total cost function for Dominos is
TCD(Q) = 5Q+ 6000:
Each has two strategies: Open a shop or Not, and they make their decisions simultaneously. The payoff is zero for a firm that does not open a shop in the shopping precinct.
Suppose Q= 3000: Construct a 2 X 2 payoff matrix for this entry game between Pizza Hut and Dominoís and Önd the NE of the game.
Suppose Q = 2000:Construct a 2x2 payoff matrix for this entry game between Pizza Hut and Dominoís and Önd the NE of the game.…
Chapter 12 Solutions
Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
Knowledge Booster
Similar questions
- please solve the question completely. Suppose an industry consists of two firms that compete in prices. Each firm produces one product. The demand for each product is as follows: q1 = 25 - 5p1 + 2p2 q2 = 25 - 5p2 + 2p1 The cost functions are C(qi) = 2 + qi for i = 1; 2. (a) Are the products produced by these firms homogenous or differentiated? (b) Find the best response function for each rm. (c) How does the price firm 1 sets change with its belief about the price of its competitor\'s product? (d) What are the Nash equilibrium prices? (e) What is the percentage markup of price over marginal cost here (this is called the Lerner index)? Do the firms have market power? Why does the Bertrand paradox of zero variable duopoly profits apply here? (f) Suppose the firms merged. What is the new price of products 1 and 2? (g) Explain intuitively why the price is higher under monopoly than under Bertrand duopoly? (h) Are total monopoly profits higher or lower than the sum of Bertrand duopoly…arrow_forwardEvaluate the following: “Since a rival’s profit-maximizing price and output depend on its marginal cost and not its fixed costs, a firm cannot profitably lessen competition by implementing a strategy that raises its rival’s fixed costs.”arrow_forwardThe market for a standard-sized cardboard container consists of two firms: CompositeBox and Fiberboard. As the manager of CompositeBox, you enjoy a patented technology that permits your company to produce boxes faster and at a lower cost than Fiberboard. You use this advantage to be the first to choose its profit-maximizing output level in the market. The inverse demand function for boxes is P = 1,200 − 6Q, CompositeBox’s costs are CC(QC) = 60QC, and Fiberboard’s costs are CF(QF) = 120QF. Ignoring antitrust considerations, would it be profitable for your firm to merge with Fiberboard? If not, explain why not; if so, put together an offer that would permit you to profitably complete the mergerarrow_forward
- Consider an industry with with two, price-taking firms, the firms face an (inverse) demand function: Pb = 215 - 3 Qb. The marginal cost for firm 1 is given by mc1 = 8 Q. The marginal cost for firm 2 is given by mc2 = 3 Q. How much will the industry produce ?arrow_forwardConsider a market with two firms. Call them firm 1 and firm 2. The demand function describing the market is P = 216 – 0.4Q. Firms are initially identical, with the cost function C(q) = 140 + 40q. Calculate the total profits in the market. Under what conditions, the two firms may succeed to collude? How much would each firm earn if they could collude?arrow_forwardJointJuice produces a prepackaged joint support supplement for relief of joint pain with 180 tablets per bottle and operates in a perfectly competitive market. Basically, all the firms in this competitive market have technologies (production and cost conditions) that are the same as JointJuice’s. Suppose JointJuice’s total cost function is given by the following where q is JointJuice’s quantity of packages per day: C(q) = 250 + 6q + 0.1q^2 The market demand function for the output in this market is given by: Q = 1848 - 2P If there are 20 identical firms in this industry, find the market equilibrium price for the prepackaged supplements. Calculate JointJuice’s optimal output level and profits given the market price for the product. If JointJuice is typical of the firms in this industry calculate the firm’s long-run equilibrium output, price, and profit level. Suppose the situation changes. JointJuice has its plant in Portland Oregon. The local government passes a new tax on…arrow_forward
- Consider the following problem: Demand: q = 100-p Retailer: marginal cost of selling r = 10 per unit Manufacturer: marginal cost of producing = 40 per unit Neither firm faces any competitor Suppose now that the retailer and the manufacturer are separate firms. Write down the profit function of the manufacturer if it sells to the retailer at w. You solved for the quantity the manufacturer will sell a minute ago, so you can use that in the profit function, and then you will have a profit function for the manufacturer that does not have p, but only has w in it. Solve for the optimal w for the manufacturer to charge and calculate the quantitysold under that w.arrow_forwardThere are two identical firms in an industry, 1 and 2, each with cost function , i = 1,2. The industry demand curve is P = 100 − 5X where industry output, X, is the sum of the two firms’ outputs (X1 + X2). (a) If each firm makes its output decisions on the assumption that the other will not react to its choices (the Cournot assumption), what is the equilibrium output for each firm? What is the equilibrium price? (b) Suppose that each firm takes it in turn to choose its level of output, on the assumption that the other’s output level is fixed. Would the process of adjustment be stable? (c) Suppose that firm 1 introduces a cost-saving innovation, so that its cost curve becomes C1 = 8X1. Firm 2’s cost curve and the industry demand curve are unchanged. What happens to the equilibrium quantity produced by each firm and to market price?arrow_forwardTwo firms compete in a market to sell a homogeneous product with inverse demand function P = 1,500 – 10Q. Each firm produces at a constant marginal cost of RM20 and has no fixed costs. Use this information to compare the output levels and profits in settings characterized by Cournot, Stackelberg and Bertrand.arrow_forward
- Consider PNW Airlines, an airline focused on transporting cargo. Their fleet is composed of four cargo airplanes. Total cargo capacity of the fleet is 100,000 cubic feet. The monthly cost of maintaining and operating the fleet is $50,000. Market research indicated that the demand curve for cargo capacity is d=300,000-25,000p where d is the demand across all segments and p is the transport price per cubic foot. What is the price that maximizes profit for PNW Airlines if all the demand comes from a single segment?arrow_forwardConsider a competitive industry with a market demand curve of P = 252 – Q, where P is market price and Q is the quantity demanded in the market. Each firm in the industry has a cost function of TC = 196 + q2, if q > 0 where q is output of the individual firm (TC = 0 if q = 0). The market is initially in long-run equilibrium. The government decides to regulate the industry by issuing licences to all firms currently in the industry, and not to allow any further entry by other firms without a licence. That is, the number of licences is fixed, and entry requires that an existing licence holder sells their licence to the potential entrant, leaving the number of firms producing in the industry fixed. Subsequent to the introduction of this regulation, the market demand curve shifts to P = 432 – Q. What is the value of the licence?arrow_forwardYou are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your two products differently, but you are unable to identify these consumers individually at the time of the sale. In particular, you know there are three types of consumers (1,000 of each type) with the following valuations for the two products: a. What are your firm’s profits if you charge $40 for product X and $60 for product Y? b. What are your profits if you charge $90 for product X and $160 for product Y? c. What are your profits if you charge $150 for a bundle containing one unit of product X and one unit of product Y? d. What are your firm’s profits if you charge $210 for a bundle containing one unit of X and one unit of Y, but also sell the products individually at a price of $90 for product X and $160 for product Y?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education