4. For this question you will be analyzing a market where firms compete under Bertrand com-...
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4. For this question you will be analyzing a market where firms compete under Bertrand com- petition. That is, firms will strategically compete by selecting prices in order to maximize their profit. For this market, let the market demand be Q = 50-2p (a) Suppose firm I has a marginal cost of 10 and firm 2 has a marginal cost of 5. What is the equilibrium price p', what are the equilibrium quantities the firms produce 41-42. and what is the equilibrium total quantity? (3 points) (b) Now consider a setup where firm I and firm 2 have the same marginal costs, but now there is also a firm 3 with a marginal cost of 4. What is the equilibrium price p', what are the equilibrium quantities the firms produce q₁-92-93, and what is the equilibrium total quantity? (4 points) (c) Now consider a setup where firm 1, firm 2, and firm 3 have the same marginal costs, but now there is also a firm 4 with a marginal cost of 4. What is the equilibrium price p", what are the equilibrium quantities the firms produce 41-42-43-44, and what is the equilibrium total quantity? (5 points) (d) What if there was a capacity constraint that limited all firms production to at most 10 units? Revisit the setup from part a (only firm 1 and firm 2) and find the equilibrium price, firm quantities, and total quantity with the capacity constraint. (4 points) 4. For this question you will be analyzing a market where firms compete under Bertrand com- petition. That is, firms will strategically compete by selecting prices in order to maximize their profit. For this market, let the market demand be Q = 50-2p (a) Suppose firm I has a marginal cost of 10 and firm 2 has a marginal cost of 5. What is the equilibrium price p', what are the equilibrium quantities the firms produce 41-42. and what is the equilibrium total quantity? (3 points) (b) Now consider a setup where firm I and firm 2 have the same marginal costs, but now there is also a firm 3 with a marginal cost of 4. What is the equilibrium price p', what are the equilibrium quantities the firms produce q₁-92-93, and what is the equilibrium total quantity? (4 points) (c) Now consider a setup where firm 1, firm 2, and firm 3 have the same marginal costs, but now there is also a firm 4 with a marginal cost of 4. What is the equilibrium price p", what are the equilibrium quantities the firms produce 41-42-43-44, and what is the equilibrium total quantity? (5 points) (d) What if there was a capacity constraint that limited all firms production to at most 10 units? Revisit the setup from part a (only firm 1 and firm 2) and find the equilibrium price, firm quantities, and total quantity with the capacity constraint. (4 points)
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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