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Two firms, A and B, have complete control of the supply of mineral water and both have zero costs. The market (inverse) demand function is given by: P = 200 – 10Q, where Q = qA (output of seller A) + qB (output of seller B). Their best reply functions (BRP) are given by: qA = 10 - .5qB qB = 10 - .5qA
a) Find the Cournot solution for the market price and output of mineral water and illustrate with a simple graph.
b) The marginal revenue function facing a monopolist is given by: MR = 200 – 20Q Demonstrate that firms A and B have an incentive to cooperate and maximize joint profits.
c) Assume each firm can select two output strategies—specifically the strategies from parts (a) and (b). Denote these alternative output strategies qa and qb. Compute and payoff/profit matrix showing the four possible outcomes.
d) Does the game that you developed in preceding part have a determinate outcome—i.e., is there a dominant strategy? Explain.
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If there are two firms in the market, what are their profits after taking into account the entry cost?
q. assume that all young women were channeled into careers as secretaries nurses as well as teachers at the same time
If the quantity demanded of a good falls by 2% when income rises by 10%, then:
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Inflation is forecasted to remain consistent with its target over the next 1-2 years. Inflation arises when:
Mitchell's income is $150, the price of X is $4, and the price of Y is $2. Given these prices and income, Mitchell buys 20 units of X and 35 units of Y. Call this combination of X and Y bundle J. At bundle J, Mitchell's MRS is 1. Given these prices a..
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