Compute total demand and firms profit, Macroeconomics

Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs equal to 40.

Market demand is given by:

P(X) = 200 - X = 200 - (x1 + x2 + x3),

where P denotes price, X total quantity demanded, and xi individual demand for firms i = 1,2, and 3.

a) Explain in what type of markets Cournot type competition can occur. Write down the demand curve and marginal revenue curve for firm 1.

b) What is the first order condition for profit maximization for firm 1? Compute the optimum quantity x1* for firm 1 as a function of quantities x2 and x3.

c) Since the firms are identical, symmetrical solutions exist also for the two other firms. Use this to compute the optimum quantity produced (and sold) for each firm.

d) Compute total demand, X, and market price, P. Compute each firm's profit, πi, and the sum total of all profits.

 

 

Posted Date: 2/16/2013 2:57:19 AM | Location : United States







Related Discussions:- Compute total demand and firms profit, Assignment Help, Ask Question on Compute total demand and firms profit, Get Answer, Expert's Help, Compute total demand and firms profit Discussions

Write discussion on Compute total demand and firms profit
Your posts are moderated
Related Questions
How can we determine fixed exchange rate If a nation has a fixed exchange rate (say against a specific currency), the government or central bank may change this fixed exchange

What is Gross National Product? Gross National Product (GNP): It measures the value of output produced through a country is citizens anywhere within the world, in a speci

The benefits of capitalism are that the governments have limited control over other business, which lets business compete.

What are the Responsibilities of central banks Responsibilities include providing banking services to commercial banks and the government and regulating financial markets and i

The Stop decay company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decay fighter, redu

Regional Trading Arrangements: You have seen in earlier Units that India has been playing an active role in WTO discussions. While Hong Kong WTO Ministerial has saved and kept

Foreign Institutional  Investment: Foreign  investment flows in the balance of payments  (BOP) comprise FDI flows and portfolio flows. The latter consists of resources mobilis

If banks expect an unusually large increase in withdraws from checking deposit accounts in the near future, what would happen to the federal funds rate, borrowed reserves and nonbo

The GDP deflator in Economy land is 200 on January 1, 2010. The deflator rises to 242 by January 1, 2012, and to 266.2 by January 1, 2013. a. What is the annual rate of inflati

By what percentage did the price level, as measured by this index, rise between 1984 and 2005?