Type out the correct answer ASAP with proper explanation 1.Assume inverse demand of P = 20 - 0.2Q where P is the market price and Q is the market demand. Also assume that there are 2 firms who both have a marginal cost of 2. (a) In a Cournot context, what is the equilibrium price, market quantity, and profit for each firm? (b) In a Bertrand context, what is the equilibrium price, market quantity, and profit for each firm?
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Type out the correct answer ASAP with proper explanation
1.Assume inverse
(a) In a Cournot context, what is the
(b) In a Bertrand context, what is the equilibrium price, market quantity, and profit for each firm?
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- 5. Consider a market where there are two mers with inverse demand func- consu tions p(q1) = 10 -91 and p(q2) = 5-92. (a) Suppose there is a single firm with inverse supply function p(q) = }q. Find the competitive equilibrium. (b) Find the elasticity of demand and supply at the equilibrium. (c) Suppose instead that there are three firms with the identical inverse sup- ply function given in part (a). Find the competitive equilibrium.usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…In the model of Bertrand Competition, it been found that firms would compete, driving price down to marginal cost so that firms make zero economic profits. This means there are firms essentially behaving as if they are perfectly competitive, even with just two firms. Despite this very clear prediction, evidence of this outcome is not ofter seen, even in markets where it is believed that firms are indeed competing via price. Why might this be? For instance, what assumptions are made about costs of firms and how might things play out if those assumptions fail? What are some things firms could do in this situation to prevent prices from dropping as low as marginal cost, even if the assumptions on costs are true?
- 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?In this question you will work out a model of price competition (Bertrand competition) with differentiated products, i.e., when the two firms that compete produce slightly different products. Consider two price-setting firms, 1 and 2, each with marginal cost c, that produce goods, 1 and 2, that are imperfect substitutes. Some customers are loyal to a particular variety of the good so both firms can still have positive sales when they set different prices. Demand for firm 1's output, q1, as a function of the prices of both products, p1 and p2 , is given by q1 = 2 – 3p1 + 3p2. And the demand for firm 2's output, q2, is given by q2 = 6 – 2p2 + P1. a. How can we tell, by looking at the demand functions above, that in the preferences of consumers the two products are substitutes? Explain your answer.. b. Write this strategic situation as a simultaneous game between the two firms, specifying the set of players, the set of alternatives and the preferences of each firm. Write down the profit…Please no written by hand solution Considerthe following problem. There are five firms producing a homogenous good and competing in quantities simultaneously. The demand function for this good is given by D(p) = 100−p, where p denotes price. The marginal cost is the same for all firms and equals 40 Answer the following questions. (a) Compute the equilibrium quantities and profits of each firm. (b) Now suppose that two of these firms (say firms 1 and 2) want to merge. (The remaining firms stay unchanged.) Merging, however, is costly. To merge, each merging firm has to pay a fixed cost F. Determine the highest fixed cost F that the two firms would be willing to pay in order to proceed with the merger.
- Q² 4 PROBLEM (4) Firm A and Firm B with identical total costs TCA (QA) related goods and competing in prices (Bertrand competition), with demands: QA = 510 - 2PA + pв and Qв= 510 - 2pв+ pa, respectively. = and TCB (QB) Q² 4 are producing (a) Calculate the Bertrand-Nash equilibrium prices. (b) Calculate the prices they charge when A is the leader and sets its price first, anticipating B's best response and taking it into account (like in Stackelberg competition). (c) Calculate the prices they charge when they collude, in order to maximize sum of their profits.A study of ethanol as a transportation fuel reveals that the competitive equilibrium is expected to be at a price of $4 per gallon and a consumption rate of 100 million gallons/day. For a production rate of 10 million gallons/day, the marginal cost is found to be $1 per gallon. Also, a a price of $10 per gallon the demand is 10 million gallons/day. Answer the following questions for this system. 1. Determine the equations for the demand and marginal cost lines. 2. Calculate the consumer and producer surplus for the market equilibrium. 3. It was discovered later that the above information ignored a government subsidy of 50 cents per gallon. How will the demand and marginal cost lines, and the competitive equilibrium, change if this subsidy is removed?Suppose that a firm is an imperfect competitor in the product market and a perfect competitor in the input markets and uses two variable inputs: Derive mathematically the first order condition showing how much of each input the firm should use se to maximize total profits Give a graphical interpretation of your answer to part (a). What characteristic of your figure indicates that the second order condition for maximization is satisfied? Indicate on your figure the level of "monopolistic exploitation".
- 3. Suppose there are only two firms in an industry selling an identical product where the quantity produced must be set well in advance of the good being sold in the market (and thus the quantity cannot be changed rapidly). The market demand for this good is given by the following equation: Q = 1,000 - 4P. Firm A's marginal cost of production is as follows: MC Α = 30 + 1.5Q₁. Firm B's marginal cost of production is as follows: MCB 100+ 2.5QB. Assume that each firm knows the other's cost of production. = a. If the two firm's decide their output simultaneously, how much output will each firm produce? What price will be charged in the market for the good? b. If the firm A's decides its output first and then B decides its output second, how much output will each firm produce? What price will be charged in the market for the good? Does A have an advantage by setting output first? Explain.DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?1. It is 1908 and you are the CEO of Ford Motor Company. General Motors startedproducing cars this year and has quickly become your chief rival. Their recent entrance, as wellas your assembly line methods, allows you the advantage of producing cars faster and choosingyour output levels first. Assume the 1908 inverse demand function for cars is P = 3900 - Q(customers view cars as identical products at this point in time) and production costs are C(qi) =100qi. a. What is Ford’s profit-maximizing output level? GM's?b. What is the market equilibrium price?c. How much profit does each firm earn?d. As the assembly line is used by other firms, the first-mover advantage disappears (fast forward100 years to present day), and more firms have entered the market (e.g. FCA, Tesla, Hyundai,Toyota, Honda, etc.), what do you expect to happen to Ford’s profit (assume demand andcosts are the same)? Explain.e. From 1908 into the 1920s, Ford offered customers one car: the Model T. Further, Henry isfamous…