Question

Homework: Assignment 2_w19 Score: 0 of 11 pts 5 of 7 (5 complete) HW Score: 20.69%, 6 of 2 Question Help Instructor-created question Consider two firms facing the demand curve P-75-5Q 18 17 where QQ1 +Q2. The firms' cost functions are 1(Q1) -15+ 100, 13 12 and C2 (2) 5+2002 Suppose that both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? Combined, the firms will produceunits of output, of which Firm 1 will produceunits and Firm 2 will produce units. (Enter a numeric response using a real number rounded to two decimal places.) What is each firm's equilibrium output and profit if they behave noncooperatively? Use the Cournot model 0 1 2 3 45 6 789 10 11 12 13 14 15 16 17 18 Firm 2's output If the firms compete, then Firm 1 will produceunits of output and Firm 2 will produce units of output

Answer 1

"Consider the given problem here the market demand curve is given by - P = 75 - 5 Q Q = Q_1 + Q_2 implies MR = 75 - 10 Q Now, the cost free of both the figure are given by C_1 = 15 + 10 Q_1 & C_2 = 5 + 20 Q_2 implies M C_1 = 10 implies M C_2 = 20 Now, M C_1 = 10 < M C_2 = 20, implies Additional cost to procedure additional level of output for ""firm 1"" is Lower compare to ""firm 2"". So here only firms 1 will produces implies Q_2 = 0 implies at the equilibrium MR = M e_1 implies 75 - 10 Q = 10 implies Q = (75 - 10)/10 = 65/10 implies Q* = 6.5 (optimum production) implies A_1* = 6.5, Q_2* = 0 & Q = Q_1 + Q_2 = 6.5 (also) combined the firm will produce ""A* = 6.5 units"" of which firm 1 will produce"" Q_1* "