Log in
Economics
2
answers
1
watching
216
views

Two firms compete by setting quantities. Firm A has a marginal cost of 10, while Firm B has a marginal cost of 20. The demand function is given by: p = 90 – Q/2, where Q = qA + qB. 

a. What are the equilibrium quantities if both firms set quantities simultaneously (Cournot competition)? 

b. What are the equilibrium quantities if Firm A sets quantity first (Stackelberg competition)?

Watch
2
answers
1
watching
216
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Two identical firms compete in competition (Cournot competition) in the same market where the inverse demand is P(Q) = 100 − Q. The constant marginal cost of both firms is 10.

(a) Find the best response function for each firm.

(b) What is the Cournot (simultaneous) equilibrium?

(c) What is the Stackelberg (sequential) equilibrium if firm 1 chooses quantity first?

Three firms produce the same product with different cost functions. Firm 1's marginal cost is 10, firm 2's marginal cost is 8, and firm 2's marginal cost is 4.

First consider a Stackelberg game with these 3 firms. Firm 1 chooses the quantity of its production first, then firms 2 and 3 chooses their quantities simultaneously after observing firm 1's quantities. Let S denote firm 1's profit in the subgame perfect equilibrium of this Stackelberg game.

Also consider a Cournot game in which the same three firms choose their quantities simultaneously. Let C denote firm 1's profit in the Nash equilibrium of the Cournot game.

Select the correct statement from the following:

A. C is never strictly greater than S.
B.

Whether C is strictly greater than S depends on the inverse demand curve.
C.

C is always strictly greater than S.

Suppose mountain spring water can be produced at no cost and the inverse demand for mountain spring water is P = 1200 - 0.2Q. Answer the following questions.


a. Suppose the market of mountain spring water is supplied by a monopoly firm that cannot price discriminate. Find the monopoly firm's profit-maximizing price and quantity of production. (10 pts.) [Hint: MR = P + (P/Q)*Q]


b. Suppose the market of mountain spring water is supplied by two firms (Firm A and firm B) that behave like a Cournot duopoly. Find the Nash Equilibrium price and quantity of production for each firm. (10 pts.) [Hint: Q = QA + QB; MRA = P + ((P/QA)*QA and MRB = P + ((P/QB)*QB]


c. Suppose the market of mountain spring water is supplied by two firms (firm A and firm B) that behave like a Stackelberg duopoly where firm A is the leader and firm B is the follower. Find the Nash Equilibrium price and quantity of production for each firm. (10 pts.) [Hint: Q = QA + QB; MRA = P + ((P/QA)*QA and MRB = P + ((P/QB)*QB]

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in