HomeworkLib
Question

Suppose that there are two firms in the industry, and they are competing in quantities. The...


Suppose that there are two firms in the industry, and they are competing in
quantities. The amount of the commodity sold by firm i is qi, i =1,2. The market
demand function is given by P = 50 − 3q , where q = q1+q2. The cost functions for each firm is given by TCi =25 + 5qi , i = 1,2.

3.1) Find the profit-maximizing quantity for each firm, and determine each
firm’s profit level.
3.2) Suppose that both firms merge. Compute the new profit-maximizing
quantity and the new profit of the merged firm. Do firms have incentive to merge, and why?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Suppose that there are two firms in the industry, and they are competing in quantities. The...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • imagine a market comprising two competing firms 1&2 which produce an identical product . the inverse...

    imagine a market comprising two competing firms 1&2 which produce an identical product . the inverse demand function of the latter is p = 102 – Q, where Q = Q1 + Q2 , Qi = output of firm I (i=1,2) lastly , the cost of production equals TC(Qi)= 2 Qi . if the two firms choose Qi simultaneously , and only once , with a view to maximize their respective profit , find the nash equilibrium (Firm 1, firm...

  • can someone help me solve/explain step by step 3) Suppose that there are only two firms in the industry for printers, HP and Xerox, making the industry a Cournot duopoly. The demand for printers is g...

    can someone help me solve/explain step by step 3) Suppose that there are only two firms in the industry for printers, HP and Xerox, making the industry a Cournot duopoly. The demand for printers is given by the equation, P = 300-4Q1-402, where P is the market price, Q1 is the quantity demanded from HP, and Q2 is the quantity demanded from Xerox. The marginal cost for each firm is constant at $60. a) Derive the equation for HP's revenue....

  • Suppose there are two firms operating in a market. The firms produce identical products, and the...

    Suppose there are two firms operating in a market. The firms produce identical products, and the total cost for each firm is given by C = 8qi, i = 1,2, where qi is the quantity of output produced by firm i. Therefore the marginal cost for each firm is constant at MC = 8. Also, the market demand is given by P = 56 –4Q, where Q= q1 + q2 is the total industry output. The following formulas will be...

  • The price in a market is dominated by two firms is affected by the quantities supplied...

    The price in a market is dominated by two firms is affected by the quantities supplied by both firms, Q1 and Q2: P = 150 - (Q1 + Q2). The marginal cost for the two firms is identical and constant and equal to 20. a. Derive the equations for total revenue for the two firms. b. Compute the profit-maximizing levels of output and prices for the firms. c. Compute the profit-maximizing level of output and price for the industry if...

  • Suppose two firms compete by selecting quantities q1 and q2, respectively, with the market price given...

    Suppose two firms compete by selecting quantities q1 and q2, respectively, with the market price given by p = 1000-3q1 -3q2. Firm 1 (the incumbent) is already in the market. Firm 2 (the potential entrant) must decide whether or not to enter and, if she enters, how much to produce. First the incumbent commits to its production level q2. The potential entrant, having seen q1, decides whether to enter the industry. If firm 2 chooses to enter, then it selects...

  • Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p...

    Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p = 15-(q1 +q2), where q1 and q2 are the quantities produced by rms 1 and 2. Both rms have constant marginal cost c1 = c2 = 3. (a) [10] Find the Cournot equilibrium of this market. Compute the consumer surplus in equilibrium. b) Now suppose firms 1 and 2 merge, so that they become a monopolist with demand function p = 15 ? q,...

  • Consider an industry with N identical firms producing a homogeneous product and competing in quantities. The...

    Consider an industry with N identical firms producing a homogeneous product and competing in quantities. The demand function is given by Q = α − P and each firm has constant marginal cost c. Two of the firms are planning to merge. If this merger occurs, the industry would then consist of N – 1 identical firms. Would such a merger occur? Comment more generally on the incentives for merger in oligopoly.

  • Assume that there are two firms competing in the market for taxi services, Company U and...

    Assume that there are two firms competing in the market for taxi services, Company U and Company G. Company U has a marginal cost MCUB = $6 per trip, and a fixed cost FCUB = $2,500,000; while Company G has a marginal cost MCGC = $12 per trip, and a fixed cost FCGC = $1,500,000. The inverse demand for taxi trips in the market is given by the function: ?=60−?/10,000 In this equation, P is the price of a taxi...

  • Suppose there is a perfectly competitive industry where all the firms are identical with identical cost...

    Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm’s total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. You also know that the market demand for this product is given by the equation P = 900 - 2Q where Q is the market quantity. In addition, you are told that...

  • 1.Consider an industry with only two firms that produce identical products. Each of the firms only...

    1.Consider an industry with only two firms that produce identical products. Each of the firms only incurs a fixed cost of $1000 to produce and marginal cost is 20. The market demand function is as follows: Q=q1+q2=400-P a. Assuming that the firms form a cartel, calculate the profit-maximizing quantity of output, price and profits b. If the firms choose to behave as in the Cournot model, what would be the profit- maximizing quantities of output, price and profits? c. if...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT