Assume that Unilever and Proctor and Gamble are the only two firms in the baby detergent...
Assume that Unilever and Proctor and Gamble are the only two firms in the baby detergent market. Their unit cost of production is $5 and their inverse demand market demand is given by P=10-2Q, where Q is the total production by the duopoly.
a. Solve for the Bertrand equilibrium price and market output.
b. As manager of Proctor and Gamble, you decided to invest heavily in advertising. Would your market demand go away if you start charging a price higher than $5 per unit? Explain.
Homework Answers
A) since Bertrand-Nash eqm with constant MC & a homogeneous good.
So at equilibrium P1 & P2 = MC = 5 .
From dd curve 5= 10- 2*Q ,
Q = 2.5 units. Answer
B) yes , if the other firm doesn't involve in advertising expenditure & hence still charges P = 5,
Then consumers will buy from the lower cost firm always.
Thus market demand will go away if any price above 5 is charged.
Add Answer to:
Assume that Unilever and Proctor and Gamble are the only
two firms in the baby detergent...
Assume that you observe two firms operating in a Bertrand oligopoly. The inverse demand function for...
Assume that you observe two firms operating in a Bertrand oligopoly. The inverse demand function for the market is P = 200 – 2Q and each firm has the same cost function of C(Q) = 20Q. What is the level of production for each firm, market price, and profit of each firm? What would happen if both firms merge to form a single monopoly with a cost function of C(Q) = 20Q?
this is a 2 part question The market for disinfectant is dominated by 2 firms, Lysol...
this is a 2 part question
The market for disinfectant is dominated by 2 firms, Lysol and Clorox. The marginal cost (MC) for providing disinfectant is $1 (average cost is also $1), and the consumer form their demand for disinfectant via the following inverse demand equation P=5-Q:. The corresponding marginal revenue curve is: P=5- 2Q a. If Lysol and Clorox decide to collude, what quantities will be sold in the market and what price will consumers pay for this quantity...
5. Suppose there is a market of yellow umbrellas and there are two firms who are...
5. Suppose there is a market of yellow umbrellas and there are two firms who are producing these umbrellas. Firm A has a marginal cost of 25. Firm B has a marginal cost of 10. The demand for yellow umbrellas is captured with the following inverse-demand function: P - 1000 - 200. What are the equilibrium price in Bertrand competition? As a reminder, Bertrand competition is the setting in which the firms directly pick the price. Knowing that can you...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for ea...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for each firm is identical and is given by T℃(a = 8h, where gi is the output of firmi A market research company has found that demand for widgets can be described by the inverse demand function P 200 2Q, where Q-q (a) (10 points) A firm's action in the Courot Duopoly game is to choose an output level. Draw each firm's reaction function as...
Two firms figure out that the market inverse demand is P= 81 - Q. Each firm...
Two firms figure out that the market inverse demand is P= 81 - Q. Each firm has the cost C(Q)= Q^2. 1. Find the marginal revenue for the individual firms. 2. What is the reaction function for each firm? 3.What is the equilibrium quantity? 4. What is the market price? 5. How much profit does each firm make? 6. In the long-run what do you expect to happen in a market with profits like this? Find the optimal production for...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where P is the market price and Q is the market quantity demanded. The marginal and average cost of each firm is 4 i. 10 marks] Show that if the firms compete as Cournot duopolists that the total in- dustry output is 4 and that if...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot duopolists. Inverse market demand is given by P 30 Q. Firm 1 has a marginal cost of 5 per unit. Firm 2's marginal cost is c2<5. (a) Suppose that c2 falls. What will happen to the Cournot equilibriumi) price, (ii) consumer surplus and total surplus, and (ii) the HHI? Explain your answer. (b) How does this example relate to criticisms of the use of...
Two large diversified consumer products firms (Firm A and Firm B) are about to enter the...
Two large diversified consumer products firms (Firm A and Firm B) are about to enter the market for a new pain reliever. The two firms are very similar in terms of their costs, strategic approach, and market outlook. The market demand curve for the pain reliever is given as: P = 2 – 0.000625Q where Q = QA + QB Both firms have the same constant marginal costs of production MCA = MCB = $0.50 per bottle; and fixed costs...
1 (Bertrand Model with sequential move) Consider a Bertrand duopoly model with two firms, Fi and...
1 (Bertrand Model with sequential move) Consider a Bertrand duopoly model with two firms, Fi and Fa selling two varieties of a product. The demand curve for Fi's product is 91 (pi,P2) = 10-Pl + 0.5p2: and the demand for F's product is where p is the price charged by F). Both firms have a constant marginal cost of (a) Write down the profits of F1 and F2 as a function of prices P1 and P2. You have b) Derive...
Laundry detergent and bags of ice—products of industries that seem pretty mundane, maybe even bor...
Laundry detergent and bags of ice—products of industries that seem pretty mundane, maybe even boring. Hardly! Both have been the center of clandestine meetings and secret deals worthy of a spy novel. In France, between 1997 and 2004, the top four laundry detergent producers (Proctor & Gamble, Henkel, Unilever, and Colgate-Palmolive) controlled about 90 percent of the French soap market. Officials from the soap firms were meeting secretly, in out-of-the-way, small cafés around Paris. Their goals: Stamp out competition and...
this is a 2 part question
The market for disinfectant is dominated by 2 firms, Lysol and Clorox. The marginal cost (MC) for providing disinfectant is $1 (average cost is also $1), and the consumer form their demand for disinfectant via the following inverse demand equation P=5-Q:. The corresponding marginal revenue curve is: P=5- 2Q a. If Lysol and Clorox decide to collude, what quantities will be sold in the market and what price will consumers pay for this quantity...
5. Suppose there is a market of yellow umbrellas and there are two firms who are producing these umbrellas. Firm A has a marginal cost of 25. Firm B has a marginal cost of 10. The demand for yellow umbrellas is captured with the following inverse-demand function: P - 1000 - 200. What are the equilibrium price in Bertrand competition? As a reminder, Bertrand competition is the setting in which the firms directly pick the price. Knowing that can you...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for each firm is identical and is given by T℃(a = 8h, where gi is the output of firmi A market research company has found that demand for widgets can be described by the inverse demand function P 200 2Q, where Q-q (a) (10 points) A firm's action in the Courot Duopoly game is to choose an output level. Draw each firm's reaction function as...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where P is the market price and Q is the market quantity demanded. The marginal and average cost of each firm is 4 i. 10 marks] Show that if the firms compete as Cournot duopolists that the total in- dustry output is 4 and that if...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot duopolists. Inverse market demand is given by P 30 Q. Firm 1 has a marginal cost of 5 per unit. Firm 2's marginal cost is c2<5. (a) Suppose that c2 falls. What will happen to the Cournot equilibriumi) price, (ii) consumer surplus and total surplus, and (ii) the HHI? Explain your answer. (b) How does this example relate to criticisms of the use of...
1 (Bertrand Model with sequential move) Consider a Bertrand duopoly model with two firms, Fi and Fa selling two varieties of a product. The demand curve for Fi's product is 91 (pi,P2) = 10-Pl + 0.5p2: and the demand for F's product is where p is the price charged by F). Both firms have a constant marginal cost of (a) Write down the profits of F1 and F2 as a function of prices P1 and P2. You have b) Derive...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago