Firms 1 and 2 produce an identical product

Assignment Help Microeconomics
Reference no: EM13721729

Firms 1 and 2 produce an identical product and serve the market described by the demand function P=100-Q, where Q=Q1+Q2. Firms compete by choosing their output levels. Firm 1's total cost function is TC(Q1)=100+20*Q1. Firm 2's total cost function is TC(Q2)=100+10*Q2. The market demand and cost structure are common knowledge, and Firm 2 moves first.
a. How many units of output will each of the firms produce in equilibrium? (5 points) b. What is the equilibrium price and equilibrium profit of each firm? (3 points)
c. Now assume that firms compete by setting prices rather than quantities and can change their prices in finely divisible (infinitely small) increments. Firm with the lowest price gets all the market, and firms split the market if there is a tie. Find the equilibrium market price(s), and market quantity in this game and explain your result. (3 points)
d. What are the individual firms' output levels and profits in Part c? (2 points)
e. Will your answers in all parts above change if the firms were to move simultaneously rather than sequentially? If so, please provide the new prices, quantities, and profits where appropriate. (6 points)

Reference no: EM13721729

Questions Cloud

Calculate the two projects npvs : Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $220,000, a 3-year expected life, and after-tax cash flows (labor savings and depre..
Yield that trevor would earn by selling the bonds today : Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $936.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,048.77, what is the yield that Trevor would earn by sell..
Current spot exchange rate and interest rate data : Proctor and Gamble's affiliate in India, P&G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer.
Where q is the quantity of output produced : 3.Suppose in the short run a perfectly competitive firm has variable cost = 4q2, and MC = 8q where q is the quantity of output produced. Also, the firm has fixed cost F = 144.
Firms 1 and 2 produce an identical product : Firms 1 and 2 produce an identical product and serve the market described by the demand function P=100-Q, where Q=Q1+Q2. Firms compete by choosing their output levels. Firm 1's total cost function is TC(Q1)=100+20*Q1. Firm 2's total cost functi..
Division is considering two investment projects : Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of ..
Create different models in different areas : Regarding the auto industry, do you see vehicles being standard across the globe so manufacturers don't need to create different models in different areas? Chances are that in 20 years driverless cars will be common if not prevalent so this industry ..
Term relating the concepts found in the chapters of module : You are expected to prepare one such paper during the term relating the concepts found in the chapters of modules A, C, D or E to real world business happenings. Each student will be randomly assigned to one of the modules for which notificatio..
What must the risk-free rate be : A stock has an expected return of 14 percent, a beta of 1.70, and the expected return on the market is 10 percent. What must the risk-free rate be? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Reviews

Write a Review

Microeconomics Questions & Answers

  How the financial stability would be effected

some financial intisutions may take action to remain profitable because of the lower interest rates. Obviously when the interest rates are lower, companies tend to lose money, because it is cheaper for consumers to pay back loans. Financial stabil..

  1in the 1900s five firms supplied amateur color film in the

1.in the 1900s five firms supplied amateur color film in the united states kodak fuji konica agfa and 3m. from a

  In as much as sovereign wealth funds swfs are established

in as much as sovereign wealth funds swfs are established to achieve national objectives the intentions of the united

  How are exchange rates evaluated find the importance of

why do nations trade? what is meant by the concept of comparative advantage? could a nation be better off

  What is the value of the steady state capital-to-labor ratio

Presume that the economy has the following production function: Y/L = 8*(K/L) 0.5. Further suppose that s = 0.2, gL = 0.3, and δ = 0.1. What is the value of the steady state capital-to-labor ratio?

  Terms of trade problem

Presume that Denmark and France both wine and produce oil. France's opportunity cost of producing a bottle of wine is 5 barrels of oil while Denmark's opportunity cost of producing a bottle of wine is 10 barrels of oil.

  How is strategy associated to organizations objectives and

define the term strategy and discuss how a strategy is related to the interaction between information technology and

  Describe the mechanism that leads from a change

Describe the mechanism that leads from a change in fiscal policy to changes in interest rates, the exchange rate, and the current account balance. Do the same for monetary policy.

  Find the size of labor force in united states for the given

use the following scenario to answer questions.in a given year in the united states the total number of residents is

  Te fixed cost for a steam line per meter of pipe is 450x

the fixed cost for a steam line per meter of pipe is 450x 50 per year. the cost for loss of heat from the pipe per

  Choose the industry recognize the organization in that

you will apply important microeconomics concepts toward the competitive strategies of an organization that operates in

  Useful tool to guide and manage the innovation process

Describe the innovation life cycle proposed by Abernathy and Utter back. Does the model provide a useful tool to guide and manage the innovation process? Do you see any weak points in the model?

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