What will be the market price of the good

Reference no: EM13753662

Suppose there are two firms in a market that each simultaneously choose a quantity. Firm 1's quantity is q1, and firm 2's quantity is q2. Therefore the market quantity is Q = q1 + q2. The market demand curve is given by P = 160 - 3Q. Also, each firm has constant marginal cost equal to 16. There are no fixed costs. The marginal revenue of the two firms are given by: ·

MR1 = 160 - 6q1 - 3q2 ·

MR2 = 160 - 3q1 - 6q2.

A) Write the equations of the Best Response Function for each firm.

B) Graph the Best Response Functions of each firm. Put them both on a single graph and identify the Cournot-Nash Equilibrium. Be sure to label your graph carefully and accurately.

C) How much output will each firm produce in the Cournot-Nash equilibrium?

D) What will be the market price of the good?

E) How much profit does each firm make?

F) Now suppose that the two firms form a cartel and decide to maximize joint profits and split the profits evenly. They agree to each produce half of the profit maximizing quantity. How much output will each firm produce? (Hint: If the two firms form a cartel, they will produce together the same amount of output as a monopolist would produce.)

G) Now suppose that Firm 1 decides to cheat on the agreement. Assuming Firm 2 produces the quantity given in F), write the equation for the residual demand that faces Firm 1.

H) If Firm 1 expects Firm 2 to produce the amount of output in F), how much output should Firm 1 produce to maximize their profit?

Reference no: EM13753662

Questions Cloud

How do effects of tariffs differ from effects of quotas : Who gains and who loses from a tariff? How do the effects of tariffs differ from the effects of quotas? If you were a small country, what would you rather utilize? 200 word answer

What are visitors really buying : What is Las Vegas selling? What are visitors really buying? Discuss these questions in terms of the core benefit actual product, and augmented product levels

Write the subsequent demand equation : Write the subsequent demand equation, with Qd as the dependent variable; Price, Advertising, Product Development, and Rel Price as the independent variables - Classify the relationship between these products as complements or substitutes. The form..

Briefly define lyndon b johnsons idea of the great society : Briefly define Lyndon B. Johnson's idea of "The Great Society" and then discuss the controversy over it.

What will be the market price of the good : How much output will each firm produce in the Cournot-Nash equilibrium and what will be the market price of the good?

Caesar entertaiment corporation : The paper should discuss the following about the Caesar's Entertaiment corporation.

What was johns locke''s philosophy of natural rights : What was Johns Locke's philosophy of natural rights?

What is it about the toyota production system : What is it about the Toyota Production System that makes it so difficult to duplicate the results of firms such as Toyota? Support your claims with at least one new resource in addition to the assigned readings.

Certificate of need : Referencing Certificate of Need, and using evidence in your text and from at least one scholarly source for support, discuss the following in a minimum of 250-300 words:

User Account

All Pages