Q4. Consider a Cournot competition model with two firms, 1 and 2. They produce identical goods in the same market with demand function P = 120-5Q, with Q=q1+q2. Furthermore, their production process generates pollution to the environment, which increases their cost of production. Their cost functions are given by C₁(91, 92) = 10 q1²+5qz C₂(91, 92) = 1092 +591 (a) Calculate their equilibrium quantities and prices for both firms. (b) Consider they collude and form a cartel, that is they perform together as a monopoly and maximize their total profits. Calculate new equilibrium quantities and prices.
Q4. Consider a Cournot competition model with two firms, 1 and 2. They produce identical goods in the same market with demand function P = 120-5Q, with Q=q1+q2. Furthermore, their production process generates pollution to the environment, which increases their cost of production. Their cost functions are given by C₁(91, 92) = 10 q1²+5qz C₂(91, 92) = 1092 +591 (a) Calculate their equilibrium quantities and prices for both firms. (b) Consider they collude and form a cartel, that is they perform together as a monopoly and maximize their total profits. Calculate new equilibrium quantities and prices.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
Section: Chapter Questions
Problem 8MC
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Please help with #4- A and B
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