Suppose both firms have entered the industry

Assignment Help Microeconomics
Reference no: EM13321697

1. Suppose all firms in a monopolistically competitive industry were merged into one large firm. Would that new firm produce as many different brands? Would it produce only a single brand? Explain.

2. Consider two firms facing the demand curve P = 50 - 5Q, where Q = Ql + Q2" The firms" cost functions are Cl(Ql) = 20 + 10Ql and C2(Q2) = 10 + 12Q2"

a. Suppose both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the industry?

b. What is each firm"s equilibrium output and profit if they behave no cooperatively? Use the Cournot model. Draw the firms" reaction curves and show the equilibrium. c. How much should Firm 1 be willing to pay to purchase Firm 2 if collusion is illegal but a takeover is not?

Reference no: EM13321697

Questions Cloud

What would be the equilibrium quantity if texas air had : Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Assume that the demand curve for the industry is given by P = 100- Q and that each firm expects the ot..
The marginal cost of both firms increases : Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $50. Describe what would happen to output and price in each of the following situations if the firms are at (i) Cournot equilibrium, (ii) c..
Find the cournot-nash equilibrium : Returning to the duopoly of part (b),suppose Firm 1 abides by the agreement but Firm 2 cheats by increasing production. How many widgets will Firm 2 produce? What will be each firm"s profits?
Calculate the profit-maximizing price and quantity for this : Suppose a second firm enters the market. Let Ql be the output of the first firm and Q2 be the output of the second. Market demand is now given by Ql + Q2 = 53-P Assuming that this second firm has the same costs as the first, write the profits of each..
Suppose both firms have entered the industry : Suppose both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the industry?
The kinked demand curve describes price rigidity : The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?
Explain the meaning of a nash equilibrium when firms are : Why is the Cournot equilibrium stable? (i.e., Why don"t firms have any incentive to change their output levels once in equilibrium?) Even if they can"t collude, why don"t firms set their outputs at the joint profit maximizing levels (i.e., the levels..
How should the firm adjust price? : On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e., the marginal cost of producing Q = Q1 + Q2)" Indicate the profit-maximizing output for each factory, ..
What is the firms percentage markup of price over marginal : Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of $40 per\ unit.If the elasticity of demand for the product is -2, find the marginal cost Of the last unit produced.

Reviews

Write a Review

Microeconomics Questions & Answers

  Explain types of long run supply curves the real industries

Explain why governments sometimes impose a price ceiling in a competitive market and explain three types of long run supply curves using the real industries.

  How much should be deposited now

What interest rate does she need to get to be able to retired as desired and compounded semi-annually, how much should be deposited now?

  To determine how many resources the firm will employ

When you are given the units of resource, total product, and marginal product. what do you need to find to determine how many resources the firm will employ.

  Compute calvin profit-maximizing output level

Compute  Calvin's profit-maximizing output level. Compute the Calvin's economic profits at this activity level. Is this activity level sustainable in long run?

  Current economic regulations and processes

Explain how a item might evolve from one market structure to another and what that means as to the value, competition and number for companies producing that product.

  Explain why veras preferences are of very special type

Vera is an impoverished graduate student who has only $100 a month to spend on fodd. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the fixed ratio

  How to generate tax revenue for the government

if the government wanted to use a food tax in order to significantly reduce the quantity of sweet and sugary drinks we consume, this could be accomploshed with a relatively small food tax on these drinks if: demand was elastic, demand was inelast..

  How many cars to fix per week?

Suppose that Dent Carr's long-run total cost of reparing s cars per week is c(s) = 2s^2 + 50. If the price he receives for repairing a car is $8, then in the long run, how many cars will he fix per week if he maximized profits?

  Production possibilities frontier

Sketch a production possibilities curve (not a straight line), with consumer goods on the horizontal axis and capital goods on the vertical axis.

  Describe a skimming price and a penetration price

Jessica Alba, a famous actress, starts the baby and family products business, The Honest Company, with Christopher Gavigan. Alba and Gavigan set up their site so that families could choose what kinds of non-toxic, all natural products they'd like ..

  Estimate the linear demand equation

Estimate the linear demand equation

  Why earning zero economic profit is not as bad as it sounds

Tanya operates a home business importing sweaters from Peru and sells them from her home. She collects $400,000 in revenue a year, and spends $200,000 on the sweaters and shipping costs, as well as $25,000 on advertising, accounting services and u..

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