A. Consider a duopoly market in which the firms operate on the basis of conjectural variation...

 

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A. Consider a duopoly market in which the firms operate on the basis of conjectural variation in prices and selling homogenous goods. Assume the demand is perfectly inelastic; at each price, consumers will demand 100 units of the good. Suppose that, when firm A and firm B set the same price, demand is split 50-50 between the two. i. Suppose that the cost function is C(q) outputs, prices and profits. = 20q, for i A,B. Determine the equilibrium ii. Suppose that the cost structure of the firms changes, and the new cost function is C(q) = fort = 10 (6 marks) 1,2. Determine the equilibrium outputs, prices and profits. (6 marks) A. Consider a duopoly market in which the firms operate on the basis of conjectural variation in prices and selling homogenous goods. Assume the demand is perfectly inelastic; at each price, consumers will demand 100 units of the good. Suppose that, when firm A and firm B set the same price, demand is split 50-50 between the two. i. Suppose that the cost function is C(q) outputs, prices and profits. = 20q, for i A,B. Determine the equilibrium ii. Suppose that the cost structure of the firms changes, and the new cost function is C(q) = fort = 10 (6 marks) 1,2. Determine the equilibrium outputs, prices and profits. (6 marks)