A homogeneous products duopoly faces a market demand function given by P = 300 − 3Q, where Q = Q1 +Q2. Both firms have constant marginal cost MC =100. a) What is Firm 1’s profit-maximizing quantity, given that Firm 2 produces an output of 50 units per year?
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Exercise 13.2. A homogeneous products duopoly faces a
P = 300 − 3Q, where Q = Q1 +Q2. Both firms have constant marginal cost MC =100.
a) What is Firm 1’s profit-maximizing quantity, given that Firm 2 produces an output of 50 units
per year?
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- 1. if the total cost function for this market is TC = 500 + 10Q2 , calculate the total and marginal costs for each of the quantities in the table. what is the demand function for this market? 2. What are the profit-maximizing quantity, price, and profit for this market? 3. If there are two firms Atlas and Bowden in this market with the same earlier total cost function and they engage in Cournot competition, what is each firm's equilibrium quantity, price, and profit? [NB: round quantities to nearest integer to find equilibrium quantity, price, and profit]There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for paving services is ?= 2040 ―20? where quantity is measured in pave jobs per month and price is measured in dollars per job. Assume Asphalt, Inc. has a marginal cost of $100 per driveway and Blacktop Bros. has a marginal cost of $150. Answer the following questions: Determine each firm’s reaction curve and graph it. How many paving jobs will each firm produce in Cournot equilibrium? What will the market price of a pave job be? How much profit does each firm earn?The Canadian retail market for roasted whole coffee beans is dominated by two firms: Tim Hortons (T) and Kicking Horse (K). The market demand function is given by P(Q)=64−0.5Q. Assume it is possible to produce partial units of output. Kicking Horse's marginal cost for each kg of roasted coffee beans is $3. Tim Horton's marginal cost for each kg of roasted coffee beans is $5 (although they've been around longer than Kicking Horse, they've only recently expanded their product line for consumers to brew their own coffee at home). What is the Cournot market equilibrium (P and Q)?
- 1. there are two companies (company 1 and company 2) that operate in a market where both firms produce a homogenous item. The two companies sell the item in a market where the demand function is given by: Q = 22 – 0.50P. Now if Q 22 where Q = q1 + q2 is the total market output and qa is company a's output, a = 1,2. company s's cost function is: Ca (qa) = 4qa. i) Explain the two firms' Bertrand equilibrium price and quantity. To enhance your explanation, use response function diagrams. ii) Assume the two companies can now collaborate and act as a single monopoly firm. Calculate the equilibrium quantities that each firm sells, the profits that each firm makes, and the market price that each firm pays. iii) How much has deadweight loss increased as a result of the collusion between the two companies?Suppose two food trucks face the following market demand curve and have the same marginal revenue and marginal cost curves. This means they both face the same costs, $1 per meal. Demand: P = 21 - 0.1QD Marginal Revenue (MR): P = 21 - 0.2QD Marginal Cost (MC): $1.00 Suppose that one of the food trucks decides to break the agreement and produce 60 meals per day. What will be the price charged per meal? Suppose that one of the food trucks decides to break the agreement and produce 60 meals per day. What will profit be for this food truck (the one that is now producing 60 meals)? What happened to the profits for the food truck that kept to the agreement and produced 50 meals? In retaliation for not keeping to the agreement, the other food truck has increased its production to 60 meals as well! Now, 120 total meals are being produced each day. What price will be charged per meal? With 120 total meals being produced each day, what will each firm earn in profits? After…A homogeneous products duopoly faces a market demand function given byP = 300 − 3Q, where Q = Q1 +Q2. Both firms have constant marginal cost MC =100.a) What is Firm 1’s profit-maximizing quantity, given that Firm 2 produces an output of 50 unitsper year?
- an Problem 5. Consider following price competition between 2 firms. Both firms choose their prices (p, and p2) simultaneously and the market demand function given by q 10-min{p₁, P2}. Assume production costs are 0 for both firms. Thus, the payoff (profit) function for firm i is: u.(Pi. Pj) (10-P.)Pi (10-pi)Pi 2 Notice that this function is not continuous in pi 1 if Pi PjAlpha and Gamma are the only two phone handset manufacturers in the world. Each firm has a cost function given by: C(q) = cq + q?, where q is number of phones produced and c=70. The market demand for phones is represented by the inverse demand equation: P = a - bQ where Q = q1 + q2 is total output, a=250 and b=1. Suppose that each firm maximizes its profits taking its rival's output as given (i.e. the firms behave as Cournot oligopolists). a) What will be the equilibrium quantity selected by each firm? What is the market price? What is the profit level for each firm? Equilibrium quantity for each firm , price , profit b) It occurs to the managers of Alpha and Gamma that they could do a lot better by colluding. If the two firms were to collude, what would be the profit-maximizing choice of output for each firm? What is the industry price? What is the profit for each firm in this case? Equilibrium quantity for each firm , price , profit c) What minimum discount factor is required for…Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. PRICE (Dollars per pound) 100 90 80 70 80 50 40 30 20 10 0 0 125 250 375 500 825 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Demand Because you know that competitive firms earn Supply (10 firms) True Supply (15 firms) If there were 10 firms in this market, the short-run equilibrium price of rhodium would be $ would . Therefore, in the long run, firms would False Supply (20 firms) per pound. From the graph, you can see that this means there will be ? per pound. At that price,…
- Two firms facing a demand curve are P = 50 -5Qwhere Q = Q1 + Q2. The cost functions of the two firms are:C1(Q1) = 20 + 10Q1C2(C2) = 10 + 12Q2Based on this information:a. Suppose both companies have entered the industry, then what is the price?and the profit-maximizing amount for the two firms under conditionsperfectly competitive market?b. What is the quantity, price and profit of the two firms ifcompanies collude in pricing?c. What are the quantities, prices, and profits of the two firms if theydo the Cournot strategy, and draw the reaction curves of the twothe company?d. What are the quantity, price, and profit of the two firms if theycarry out the stakeberg strategy.Suppose Firm X is a dominant firm in a market where the market demand is Q = 1200 -2p. Once Firm X sets its price, those small competitors set their prices a little lower so that they can always sell up to their capacity. Assume the small firms’ combined capacity is 100 units. Further assume Firm X’s marginal cost is 50. Answer the following questions. Let Q^D be the quantity produced by the dominant firm. Write down the residual demand function faced by Firm X. (Hint: Think about how Q and Q^D are related.) Find Firm X’s profit-maximizing price.21. In the industry, only two firms (Firm 1 and Firm 2) operate and they produce a homogenous good. They collude: they maximize their joint profit and split it equally between them. Firm I has the total cost of producing q; units of output given by the function TC(q)-8q1. The total cost of producing q: units of output for Firm 2 is TC(q)-q. Only integer quantities are allowed (no fractions). The market demand for the good is Q(P)-72-P, where Q is the quantity demanded and P is the unit price of the good. How many units of the good do cach firm produce in the equilibrium? A. Each firm produces 14 units. B. Firm I produces 32 units, and Firm 2 produces 2 units. C. Firm 1 produces 28 units, and Firm 2 produces 4 units. D. Each firm produces 16 units. E. None of the above
