Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 15, Problem 15.11P
a)
To determine
Reason for extent of firm’s market.
b)
To determine
To find:
Profit maximizing price.
c)
To determine
To find:
Derivation of
d)
To determine
To find:
Profit at equilibrium is
e)
To determine
To find:
Number of firms to enter in long-run.
f)
To determine
To find:
Socially optimal level of differentiation
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Consider a "Betrand price competition model" between two profit maximizing widget producers say A and B. The marginal cost of producing a widget is 4 for each producer. Each widget producer has a capacity constraint to produce only 5 widgets. There are 8 identical individuals who demand 1 widget only, and individuals value each widget at 6. If the firms are maximizing profits, then which of the following statement is true:
a) Firm A and Firm B will charge 4
b) Firm A and Firm B will charge 6
c) Firm A and Firm B will charge greater than or equal to 5
d) None of the options are correct.
Explain clearly.
Consider a market that is a Bertrand oligopoly with 5 firms in the market. Each of these firms produce an identical product and each have the same cost function of C(Q) = 80Q. The inverse market demand for this product is P = 2480 – 2Q. What is the equilibrium market price?
The prisoner’s dilemma can be used to illustrate that by pursuing self-interest, firms will undertake actions that lead to an outcome that is not optimal for colluding firms.
Group of answer choices
True
False
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