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
Based on the e-Activity, describe the dumping incident and how anti-dumping regulations could have been modified to prevent the incident you described.

Reaganomics Supply-side economics or New Classical Economics has gained distinct prominence in the early 1980s with the election in the U.S.A of a conservative government unde

What is Quantitative easing Quantitative easing (QE) is an unorthodox monetary policy which since 2009 has been intermittently pursued by Bank of England and US Federal Reserv

Let a macroeconomic model be of the following form: C = a + bY D                             a = 10 T = T 0                                   b = 4/5 G = G 0

Q. Explain about Labor Market  in AS-AD model? In AS-AD model, economy will always be on the response curve - the thick line in chart below.  Figure: The labor in the

subjective questions on national income determination

Instructions For the following 10 questions, consider an economy which is initially in equilibrium without a tax, with P* of $90 and Q* of 10. Later, a tax is put on the market

Historically, the proportion of students entering a university who finished in 4 years or less was 64%. To test whether this proportion has decreased, 122 students were examined an

Using a short-run Phillips Curve, illustrate the change in inflation and unemployment resulting from the increase in profit expectations.

In 2010, Forbes magazine listed Bill Gates, the founder of Microsoft, as the richest person in the United States. His personal wealth was estimated to be $53 billion. If there were