One-half the monopoly output nash equilibrium outcome

Assignment Help Business Economics
Reference no: EM131101536

The inverse market demand for fax paper is given by P = 400 − 2Q, where Q = q1 + q2. There are two firms who produce fax paper. q1 is output of firm 1 and q2 is output of firm 2. Each firm has a unit cost of production equal to 40, and they compete in the market in quantities. That is, they can choose any quantity to produce, and they make their quantity choices simultaneously. a. Show how to derive the Cournot-Nash equilibrium to this game. What are firms’ profits in equilibrium? b. What is the monopoly output, i.e., the one that maximizes total industry profit? Why isn’t producing one-half the monopoly output a Nash equilibrium outcome?

Return to the last question, but suppose now that firm 1 has a cost advantage. Its unit cost is constant and equal to 25 whereas firm 2 still has a unit cost of 40. What is the Cournot outcome now? What are the profits for each firm?

Reference no: EM131101536

Questions Cloud

Sensitivity analysis for the payoffs associated : For the Pittsburgh Development Corporation problem in Section 4.3, the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. In Section 4.4 we conducted a sensitivity analysis for the p..
Compare the euacs for leasing and buying the loader : A construction firm needs a new small loader. It can be leased from the dealer for 3 years for $5500 per year including all maintenance, OR it can be purchased for $20,000. The firm expects the loader to have a salvage value of $7,000 after 7 years. ..
Compensation market-driven or are there non-market factors : Is CEO compensation market-driven or are there non-market factors that contribute to CEO compensation? What are the possible consequences for organizations and society for the continuing escalation in CEO compensation
Demand is equal to elasticity of supply in absolute value : The XYZ company is a producer of dishwashers. The company’s marketing department has estimated the following demand curve for the company’s best-selling model in one of its regions. If the government increases the sales tax by 1 percent, what will be..
One-half the monopoly output nash equilibrium outcome : The inverse market demand for fax paper is given by P = 400 − 2Q, where Q = q1 + q2. There are two firms who produce fax paper. q1 is output of firm 1 and q2 is output of firm 2. Each firm has a unit cost of production equal to 40, and they compete i..
Federal reserve uses expansionary monetary policy : If the Federal Reserve uses expansionary monetary policy, then:
Create model showing the effects of price floor : Create a model showing the effects of a Price Floor.
Holding supply constant an increase in demand : Holding supply constant, an increase in demand will
Increase in demand causes equilibrium price and quantity : An increase in demand causes equilibrium price and quantity to rise. A decrease in demand causes equilibrium price and quantity to fall. An increase in supply causes equilibrium price to fall and quantity to rise.

Reviews

Write a Review

 

Business Economics Questions & Answers

  An input in fixed supply among different products

Firms often face the problem of allocating an input in fixed supply among different products. Find the optimal crude oil allocation for the following example if the profit associated with square foot of fiber is cut to $0.375, What is gasoline margin..

  It would not cost firm to product anything in the short run

It would not cost a firm to product anything in the short run if price were:

  Developer should assemble the parcels

Illustrate what is the condition that determines whether or not the developer should assemble the parcels.

  Decided that in order to have a comfortable retirement

You have decided that in order to have a comfortable retirement you will need to replace $65,000in income each year in retirement. Assuming you will need 20 years of retirement income and an inflation rate of 3.5%, how much will you need to have save..

  Consider and economy with two consumers

Consider and economy with two consumers, Jeff and Jay, and producing two goods, wine and cheese. Illustrate using an Edge worth Box diagram and a production possibilities frontier together, both efficiency in exchange and efficiency in production. Id..

  Federal reserve do to combat the nancial crisis

What did the Federal Reserve do to combat the nancial crisis that accompanied the Great Recession of 2007-2009? What problems is the Federal Reserve currently having to deal with as a result of these activities?

  The tradeoffs you face with differentiation and the cost

This week, you have a car to sell. You want to purchase a new vehicle and the dealer is offering you, well, almost nothing for the car you have now. So you’re going to sell it outright. Describe the competitive positioning you face and are going to t..

  Researchers have found that the price elasticities for food

In Thailand, researchers have found that the price elasticities for food, alcohol, and telecommunications are -.10, -.84, and -.025, respectively. If the goal is to raise tax revenues with the least excess burden possible, what should should be the t..

  How many will be unemployed

If the minimum wage is set at $100, how many will be unemployed? If the minimum wage is equal to $125, what is the quantity of labor supplied, the quantity of labor demanded, and number unemployed?

  1 you are the manager of a racquet club as well as you want

1. you are the manager of a racquet club as well as you want to determine the best cost for local rentals. assume that

  What are the four market types

What are the four market types? Give an illustration of each. From a social standpoint, what is the problem with monopoly? Discuss this using an example for illustration.

  What is the equilibrium wage of white workers

Suppose that the labor market is competitive and there are a total of 1,000 black workers and 1,000 white workers (who each supply their labor in elastically). Both black and white workers are equally productive, having constant individual dollar pro..

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