HomeworkLib
Question

Two competing firms (Firm A and Firm B) have exclusive access to the latest technology for...

Two competing firms (Firm A and Firm B) have exclusive access to the latest technology for producing a new kind of microprocessor chip. The market demand curve for this new chip is estimated to be: P = 16 − 0.005Q where Q = QA + QB is the total quantity supplied by the two firms. Firm A has a total cost of TCA = 300 + 5QA while Firm B has a total cost of TCB = 200 + 6QB.

(a) Assume that both firms choose their output at the same time.

(i) What are the equilibrium quantities produced by Firm A and Firm B?

(ii) Calculate the equilibrium price and use it to determine the profits earned by each firm.

(b) Now suppose that, due to some quick thinking by its CEO, Firm B has all the equipment already in place to set production in motion before Firm A. As a result, Firm B chooses how many chips to produce before Firm A.

(i) Solve for the equilibrium quantities produced by Firm A and Firm B. Explain which Oligopoly model is appropriate for this situation.

(ii) What is the resulting equilibrium price?

(iii) Calculate the profits for each firm in equilibrium.

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

Homework Answers

Answer #1

0 0
Add a comment
Know the answer?
Add Answer to:
Two competing firms (Firm A and Firm B) have exclusive access to the latest technology for...
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

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Consider two firms (Firm A and Firm B) competing in this market. They simultaneously decide on...

    Consider two firms (Firm A and Firm B) competing in this market. They simultaneously decide on the price of the product in a typical Bertrand fashion while producing an identical product. Both firms face the same cost function: C(qA) = 12qA and C(qB) = 12qB, where qA is the output of Firm A and qB is the output of Firm B. The demand curve is P = 30 - Q. (i) What will be the Bertrand-Nash equilibrium price (pB) chosen...

  • Exercise 12.2 Assume that two companies (A and B) are duopolists who produce identical products. Demand...

    Exercise 12.2 Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200−QA−QBP=200−QA−QB where QAQA and QBQB, are the quantities sold by the respective firms and P is the selling price. The total cost functions for the two companies are TCA=1,500+55QA+QA2TCA=1,500+55QA+QA2 TCB=1,200+20QB+2QB2TCB=1,200+20QB+2QB2 Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm’s output will not change)....

  • PART TWO (10 points each, 40 points total). Answe r the following problems in the space...

    PART TWO (10 points each, 40 points total). Answe r the following problems in the space provided Please show your work in an organized way with clearly labeled graphs if you choose to use any. 11. Two identical firms are engaged in Cournot competition, with cost functions TCA(QA) 150 Qa and TCB(Qs) -150 QB. The market demand is given by P 1050-20. a) Find the Cournot-Nash equilibrium and profit for each firm. b) Find the Stackelberg equilibrium if A leads...

  • Assume that two companies (A and B) are duopolists who produce identical products. Demand for the...

    Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200−QA−QBP=200−QA−QB where QAQA and QBQB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA=1,500+55QA+QA2TCA=1,500+55QA+QA2 TCB=1,200+20QB+2QB2TCB=1,200+20QB+2QB2 Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In...

  • In Little Town, there are two suppliers of mineral water: A and B. Mineral water is...

    In Little Town, there are two suppliers of mineral water: A and B. Mineral water is considered a homogenous good. Let pA and pB denote the price and qA and qB the quantity sold by firms A and B, respectively. Suppose that the municipality provides all the water for free, so firms don't bear any production cost. The inverse demand function for mineral water is given by P=12-1/3Q where Q=qA + qB denotes the aggregate supply of mineral water. Suppose...

  • Two oligopolies (Firm A and Firm B) have access to the same the same technology and...

    Two oligopolies (Firm A and Firm B) have access to the same the same technology and have similar costs. FC = 0 MC = AVC = ATC = $100 Assume the demand of the product is given below: P=1000-Q Remember Q= q_A+ q_B Where q_(A ) is production by firm A and q_B-is production by firm B (a) Assume that they compete with price. i. How low can the price would go? Explain ii. Obtain the competitive price, quantity produced...

  • Firm A and Firm B compete in the sale of a product with market inverse demand...

    Firm A and Firm B compete in the sale of a product with market inverse demand given by P(0) = 160-Q, where Q is market output, and Q = qA + qB (8a-Firm A's output, qB-Firm B's output). Firm A's Total Cost function is given by TCA(qA) 10qA and Firm B's is given by Find the value of Q when Firms A and B Cournot compete to maximize profits (i.e when they simultaneously determine profit maximizing output). At what price...

  • Problem 1. There are two suppliers of distilled water, labeled firm A and firm B. Distilled...

    Problem 1. There are two suppliers of distilled water, labeled firm A and firm B. Distilled water is considered to be a homogenous good. Let p denote the price per gallon, qA quantity sold by firm A, and qB the quantity sold by firm B. Firm A and firm B bear a production cost of cA = cB = 2 per one gallon of water. The inverse demand function for distilled water is given by p = 12 − 1Q,...

  • Consider a market with two firms, A and B, producing a differentiated product. The demand for...

    Consider a market with two firms, A and B, producing a differentiated product. The demand for the products of firms A and B are, respectively, QA = 60 – 2pA + pB and QB = 60 – 2pB + pA, where pA is the price of firm A and pB is the price of firm B. Each firm has a constant marginal cost of production which is equal to 30 and no fixed costs. The firms choose prices only once...

  • Suppose there are two firms competing in a market. Both firms produce identical products. Firm One...

    Suppose there are two firms competing in a market. Both firms produce identical products. Firm One is an efficient firm and has total cost function C1=5q1; Firm Two is a less efficient firm and has total cost function C2=10q2 . Market demand for this product is given by Q=150-2p. If two firms compete in quantities of production, find out the best response function of each firm and the equilibrium output level of each firm.

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