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13 Feb 2018
10. Consider a market with two firms, one incumbent and one potential entrant. They each produce an identical good. The entrant has a marginal cost of $5 per unit, while the incumbent has a marginal cost of $2. The demand curve for the market is given by
P= Q - 100
In order to enter the market, the potential entrant must build a factory at a cost of $F.
a) If the market is based on a Cournot equilibrium, for what values of F (if any) will the new firm enter the market?
b) If the market is based on a Bertrand equilibrium, for what values of F (if any) will the new firm enter the market?
c) How would your answers change if the incumbent had a marginal cost of $1 per unit?
10. Consider a market with two firms, one incumbent and one potential entrant. They each produce an identical good. The entrant has a marginal cost of $5 per unit, while the incumbent has a marginal cost of $2. The demand curve for the market is given by
P= Q - 100
In order to enter the market, the potential entrant must build a factory at a cost of $F.
a) If the market is based on a Cournot equilibrium, for what values of F (if any) will the new firm enter the market?
b) If the market is based on a Bertrand equilibrium, for what values of F (if any) will the new firm enter the market?
c) How would your answers change if the incumbent had a marginal cost of $1 per unit?
glorysoft2Lv10
2 Oct 2022
Collen VonLv2
16 Feb 2018
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