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).
For Company A, the long-run equilibrium output is - and the selling price is.
For Company B, the long-run equilibrium output is- , and the selling price is.
At the equilibrium output, Company A earns total profits of- and Company B earns total profits of- . Therefore, the total industry profits are- .
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Exercise 12.2
Assume that two companies (A and B) are duopolists who produce
identical products. Demand...
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...
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