Calculate cournot equilibrium amount of output for each firm

Assignment Help Business Economics
Reference no: EM131378475

Consider an industry with 2 firms, each having marginal cost equal to zero. The inverse demand function facing this industry is

P(Y) = 100 – Y

where Y = y1 + y2

(a) What is the competitive equilibrium level of industry output?

(b) If each firm behaves as a Cournot competitor, what is firm 1’s optimal choice given firm 2’s output?

(c) Calculate the Cournot equilibrium amount of output for each firm.

(d) Calculate the cartel amount of output for the industry.

(e) If firm 1 as follower and firm 2 behaves as leader, calculate the Stackelberg equilibrium output.

Reference no: EM131378475

Questions Cloud

About what price should the firm charge : The marginal cost of preparing a large latte in a specialty coffee house is constant at $1. The firm's market research reveals that the elasticity of demand for its large lattes is constant, with a value of about -1.3. If the firm wants to maximize p..
Instead holds the money supply constant : If the central bank in the preceding question instead holds the money supply constant and allows the ­interest rate to adjust, the change in aggregate demand resulting from the increase in government purchases will be
Calculate the marginal cost : Consider a production function as Y=axb and Variable Cost function (VC) = vx. Give the inverse function of the production function and define the parameter b in the production function. Calculate the Marginal cost.
What is a natural monopoly : Consider the market for natural gas with the following market demand and market total-cost functions: D : P(Qd) = 120 - 0.02Qd; C(Qs) = 25,000 + 60Qs.Q is weekly production in cubic meters (m3), and P is price in cents per cubic meter (so is the cost..
Calculate cournot equilibrium amount of output for each firm : Consider an industry with 2 firms, each having marginal cost equal to zero. What is the competitive equilibrium level of industry output? Calculate the Cournot equilibrium amount of output for each firm. Calculate the cartel amount of output for the ..
Write a succinct introduction that informs the reader : Write a succinct introduction that informs the reader of the topic of the assignment and its organization. Remember, an effective essay introduction tells the reader what you will say.In one to two paragraphs, describe the observations that you mad..
Discuss about the post given below : Read the three statuses below and think of three different scenarios where the original status listed could be interpreted to mean something different.What it meant to the original poster depends on their situation and personality, and what it mea..
Describe premacks principles of reinforcement : Describe Premack's principles of reinforcement and of punishment. Describe a hypothetical situation for which these principles would predict reinforcement of one behavior, and punishment of another behavior.Describe participant modeling and provid..
How can the incident be communicated to other staff : BSBMGT605 - Provide leadership across the organisation Learner Workbook Activities.  In teams, or as directed by the instructor, explain your views or provide examples from your workplace on communicating results of incidents to relevant groups and..

Reviews

Write a Review

 

Business Economics Questions & Answers

  Find the us international trade policies

Does NAFTA affect the automobile industry's decisions on what to do with labor and capital costs? If so, how? In your opinion, was this trade agreement good for the United States and Mexico from an economic standpoint?

  Offered the alternative of receiving

Suppose you are offered the alternative of receiving either $2,007 at the end of five years or $1,500 today. There is no question that the $2,007 will be paid in full (i.e. there is no risk). Assuming that the money will not be needed in the next fiv..

  Though the inflation rate changed over time

What are expectations, and why are they important in macroeconomic models? What would you think about a macroeconomic model that assumed that people’s expectations of inflation were constant, even though the inflation rate changed over time?

  Draw the income and substitution effects of price decrease

If the composite good costs $1, what is the price of good x in each of the three budget lines? Draw the income and substitution effects of a price decrease from the most expensive to the second most expensive on the figure above. Draw the income and ..

  Ratio of productivity to total quantity of variable input

The ratio of total productivity to the total quantity of a variable input being used in production is. In the long run all production inputs are variable. Decreasing returns to scale prevail when output increases by a proportion that is smaller than ..

  Effect on pricing policy can be profound and far reaching

Elasticity’s effect on pricing policy can be profound and far reaching. A poorly thought out price increase can drive profit down considerably. Likewise, a price cut might drive demand up to a level that the business cannot keep pace with thus disapp..

  Illustrate budget line with diagram

If Amy spent her entire allowance, she could just afford 8 candy bars and 8 comic books a week. She could also just afford 10 candy bars and 4 comic books. The price of a candy bar is 50 cents. Illustrate her budget line with a diagram (be sure to la..

  This will affect the national account of the current year

The only change which happened between the previous and the current year is that while in the previous year all of the 100 million worth of imports were used for consumption, now all imports are directed exclusively to investment. Therefore this will..

  Find the optimal contract length when the marginal cost

Suppose the marginal benefit of writing a contract is $50, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is: MC(L) = 10 + 2L. b. MC(L) = 5 + 2L. What happens to the optimal contra..

  Cross-price elasticity of demand between goods

Suppose the cross-price elasticity of demand between goods X and Y is 2. How much would the price of good Y have to change in order to change the consumption of good X by 50 percent?

  Stupid actions even considered to be errors by economists

Suppose that Joe enjoys and repeatedly does stupid things like getting heavily into debt and insulting police officers. Do these actions constitute systematic errors? If he gets what he wants each time, are his stupid actions even considered to be er..

  The interest earned versus the duration of the investment

Each year,$7,500 is invested at 4% annual compound interest a) What is the value of the investment portfolio after 20 years? After 25 years? After 30 years? b) Repeat part (a) with the investment at 5% annual compound interest c) Based answers to (a)..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd