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Find the equilibrium profits

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Reference no: EM131660958

Assignment Questions

Firms 1 and 2 produce horizontally differentiated products. The demand for firm 1's product is given by the equation,

Q1 = 100 - P1 + P2/2

The demand for firm 2's product is given by the equation,

Q2 = 200 - 4P2 + 2P1.

Firm 1's marginal cost is MC1 = $10, while firm 2's marginal cost is MC2 = $20. The two firms compete in Bertrand competition, by simultaneously selecting prices.

Question 1: Is firm 2's product a substitute or a compliment for firm 1's product? Briefly explain. Your answer must reference firm 1's demand function.

Question 2: Does the demand for firm 2's product satisfy the law of demand ? Briefly explain. Your answer must reference firm 2's demand function.

Question 3: What is the equation of firm 1's best-response function?

Question 4: What is the equation of firm 2's best-response function?

Question 5: Find the equilibrium prices.

Question 6: Find the equilibrium profits.

Question 7: Which firm enjoys the greater market power?

Reference no: EM131660958

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Reviews

len1660958

9/27/2017 6:46:34 AM

1. Answer all questions. 2. Show all working. 3. All answers and equations must be typed. 4. All graphs must be computer generated. 5. Your assignment must be your own work. 6. Submit your assignment through Turnitin.

len1660958

9/27/2017 6:46:03 AM

Assignment Instructions Prepare your assignment in accordance with the following instructions: 1.Answer all questions. 2. Show all working. 3. All answers and equations must be typed. 4.All graphs must be computer generated. 5.Your assignment must be your own work. 6.Submit your assignment through Turnitin

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