There are two potential firms in an industry with demand P=130-Q. Both firms have a constant...
- There are two potential firms in an industry with demand P=130-Q. Both firms have a constant marginal cost of production equal to $40. The fixed cost to both firms is $1300.
- How many firms will be in the market, and what is the industry level of output, and what is the profit for each firm?
- Would an incumbent firm that faces the possibility of entry from one firm prefer the above situation or would it prefer that both firms have a marginal cost of $20 and everything else remains the same? Explain
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There are two potential firms in an industry with demand
P=130-Q. Both firms have a constant...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is P = 120 Q where Q is the combined output of the firms. Firm A has a marginal cost of 0 and firm B has a marginal cost of 10. There is an infinite sequence of periods in which firms simultaneously set prices. In this question we will consider whether the following collusive strategies with trigger strategy punish- ments are a subgame perfect Nash...
Consider two firms competing in a market with a demand function P=150-Q. Both firms have constant...
Consider two firms competing in a market with a demand function P=150-Q. Both firms have constant marginal cost c>0. There are no fixed costs. They compete by setting prices p₁ and p₂ simultaneously. (Bertrand game.) Which of the following statements is not correct? Select one: a. Both firms charging charging p = c is a Nash equilibrium. b. When firm 1 sets where is the industry monopoly price, firm 2's best response is to set . c. When p₁=c, any price p₂≥c...
Suppose that the only two firms in an industry face the market (inverse) demand curve p-...
Suppose that the only two firms in an industry face the market (inverse) demand curve p- 130-Q. Each has constant marginal cost equal to 4 and no fixed costs. Initially the two firms compete as Cournot rivals (Chapter 11) and each produces an output of 42. Why might these firms want to merge to form a monopoly? What reason would antitrust authorities have for opposing the merger? (Hint: Calculate price, profits, and total surplus before and after the merger.) The...
Two firms in an industry engaged in Bertrand competition. The industry inverse demand function is p...
Two firms in an industry engaged in Bertrand competition. The industry inverse demand function is p = 40 - 2Q, and marginal cost is MC = 10 for both firms. No firm faces capacity constraints. Find the BertrandNash equilibrium (prices, quantities, profits consumer surplus, total surplus, herfindahl index and lerner index)
6. Industry demand is given by: QD = 1000 - P All firms in the industry...
6. Industry demand is given by: QD = 1000 - P All firms in the industry have identical and constant marginal and average costs of $50 per unit. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn? Now suppose that there are five firms in the industry, and that they collude to set price. What price will they set? What will be the output of each...
ECON M/C Q An industry has two firms. The demand curve for the industry's output is...
ECON M/C Q
An industry has two firms. The demand curve for the industry's output is given by p= 36 - 3q, where q is the total industry output. Each firm has a constant marginal cost equal to 6. Suppose that firms compete in Cournot style (quantity competition). Which of the following statements is correct? Select one: a. Firm 1's reaction function is q1 = 9 -0.592. b. Firm 1's reaction function is qı = 9 - 92. C. Firm...
Suppose we have a market with two firms, and market demand Q = 18 - P...
Suppose we have a market with two firms, and market demand Q = 18 - P and a cost c(Q) =Q2. Suppose that firm 1 has first mover advantage. a. What do we call a market where two firms move sequentially? b. Set up and solve for firm 1's output, firm 2's output, market output, and equilibrium price. Show all work for each step. C. Do consumers prefer this over the Cournot equilibrium? d. Does firm 2 prefer this type...
Scenario: Two identical firms make up an industry (duopoly) in which the market demand curve is...
Scenario: Two identical firms make up an industry (duopoly) in which the market demand curve is represented by Qd=5,000-4P, and the marginal cost (MC) is constant and equal to $650. Suppose the two firms decide to cooperate and collude; resulting in the same amount of production for each firm. What is the profit-maximizing price and output for the industry? Price = $300; Q= 2,000 units Price = $400, Q= 5,000 units Price = $950; Q= 1,200 units Price = $600,...
An industry consists of two firms with identical demand function ? = 100 − ??, where...
An industry consists of two firms with identical demand function ? = 100 − ??, where ?? = ?1 + ?2. Both firms have identical cost ?? = 40??, where ? = 1,2. Both firms pay attention to the behaviour of their competitor in determining the output produced, and both firms make their decision simultaneously (no one moves first). (a) If both firms decide to compete in determining their outputs, find the profit maximizing q and P and calculate the...
Problem 1: Suppose that the market demand function is given by q-80-2p. All firms in the...
Problem 1: Suppose that the market demand function is given by q-80-2p. All firms in the industry have marginal cost of 10 and no fixed cost. In this problem, the firms compete in quantities. (a) What is the equilibrium price, quantity, consumer surplus, profit (producer surplus) and deadweight loss if there is only one firm in the industry? (b) Now answer the same question if there are two firms in the industry (duopoly). How does your answer compare to the...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is P = 120 Q where Q is the combined output of the firms. Firm A has a marginal cost of 0 and firm B has a marginal cost of 10. There is an infinite sequence of periods in which firms simultaneously set prices. In this question we will consider whether the following collusive strategies with trigger strategy punish- ments are a subgame perfect Nash...
Suppose that the only two firms in an industry face the market (inverse) demand curve p- 130-Q. Each has constant marginal cost equal to 4 and no fixed costs. Initially the two firms compete as Cournot rivals (Chapter 11) and each produces an output of 42. Why might these firms want to merge to form a monopoly? What reason would antitrust authorities have for opposing the merger? (Hint: Calculate price, profits, and total surplus before and after the merger.) The...
ECON M/C Q
An industry has two firms. The demand curve for the industry's output is given by p= 36 - 3q, where q is the total industry output. Each firm has a constant marginal cost equal to 6. Suppose that firms compete in Cournot style (quantity competition). Which of the following statements is correct? Select one: a. Firm 1's reaction function is q1 = 9 -0.592. b. Firm 1's reaction function is qı = 9 - 92. C. Firm...
Suppose we have a market with two firms, and market demand Q = 18 - P and a cost c(Q) =Q2. Suppose that firm 1 has first mover advantage. a. What do we call a market where two firms move sequentially? b. Set up and solve for firm 1's output, firm 2's output, market output, and equilibrium price. Show all work for each step. C. Do consumers prefer this over the Cournot equilibrium? d. Does firm 2 prefer this type...
Problem 1: Suppose that the market demand function is given by q-80-2p. All firms in the industry have marginal cost of 10 and no fixed cost. In this problem, the firms compete in quantities. (a) What is the equilibrium price, quantity, consumer surplus, profit (producer surplus) and deadweight loss if there is only one firm in the industry? (b) Now answer the same question if there are two firms in the industry (duopoly). How does your answer compare to the...
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