1. Suppose Firm 1 is a monopoly in the chocolate market. The inverse demand function is...

 

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1. Suppose Firm 1 is a monopoly in the chocolate market. The inverse demand function is Pm 100 2Qm and the cost function is Cm = 100m- a) What is the profit maximizing quantity Qm for Firm 1? b) What is the profit maximizing price Pm for Firm 1? = = Now, suppose Firm 2 enters the market, and the market is characterized by Stackelberg equilibrium. Let Firm 1 be the leader and Firm 2 be the follower. The inverse demand is still P 100 - 2Q where Q is q₁ +92 in this case. The cost that is faced by each firms is given by: C₁ 10q, where i = 1,2 = c) What are the profit maximizing quantity for firm 1 and firm 2? d) What is the profit maximizing price? e) Suppose the firms behave as price takers (perfectly competitive market), compute the equilibrium price and quantity. f) Compute the consumer surplus and welfare loss (deadweight loss) in each imperfectly competitive market (monopoly market and duopoly market-Stackelberg). Now, suppose both firms set quantity simultaneously, and the market is characterized by Cournot equilibrium. The inverse demand is still P = 100 2Q where Q is q₁ +92. The cost that is faced by each firms is given by: C₁ = 10q, where i = 1,2. g) What are the profit maximizing quantity for firm 1 and firm 2? h) What is the profit maximizing price? i) Compute the welfare loss (deadweight loss). j) Rank the equilibrium prices from high to low for four markets (perfectly competitive market, duopoly-Stackelberg, duopoly-Cournot and monopoly). 1. Suppose Firm 1 is a monopoly in the chocolate market. The inverse demand function is Pm 100 2Qm and the cost function is Cm = 100m- a) What is the profit maximizing quantity Qm for Firm 1? b) What is the profit maximizing price Pm for Firm 1? = = Now, suppose Firm 2 enters the market, and the market is characterized by Stackelberg equilibrium. Let Firm 1 be the leader and Firm 2 be the follower. The inverse demand is still P 100 - 2Q where Q is q₁ +92 in this case. The cost that is faced by each firms is given by: C₁ 10q, where i = 1,2 = c) What are the profit maximizing quantity for firm 1 and firm 2? d) What is the profit maximizing price? e) Suppose the firms behave as price takers (perfectly competitive market), compute the equilibrium price and quantity. f) Compute the consumer surplus and welfare loss (deadweight loss) in each imperfectly competitive market (monopoly market and duopoly market-Stackelberg). Now, suppose both firms set quantity simultaneously, and the market is characterized by Cournot equilibrium. The inverse demand is still P = 100 2Q where Q is q₁ +92. The cost that is faced by each firms is given by: C₁ = 10q, where i = 1,2. g) What are the profit maximizing quantity for firm 1 and firm 2? h) What is the profit maximizing price? i) Compute the welfare loss (deadweight loss). j) Rank the equilibrium prices from high to low for four markets (perfectly competitive market, duopoly-Stackelberg, duopoly-Cournot and monopoly).

Answer rating: 100% (QA)

a The profit maximizing quantity Qm for Firm 1 is 20 b The profit maximizing price Pm for Firm 1 is 80 c The profit maximizing quantity for firm 1 and firm 2 are q117 and q23 d The profit maximizing p... View the full answer