A market has a demand curve given by Q = 120-2P. All suppliers have identical total...

 

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A market has a demand curve given by Q = 120-2P. All suppliers have identical total cost, TC= 20Q and produce homogeneous goods. a) For each of the following market structures, compute the output produced by each firm (if possible), the total industry output, the market price and each firm's (if possible) profit. i) There is only one firm in the industry (Monopoly) [2 marks] ii) There are many small firms in the market (Perfect Competition) [2 marks] iii) There are two firms in the industry (Firm 1 and Firm 2), compete in quantities, and choose quantities simultaneously (Cournot duopoly) [2 marks] iv) There are two firms in the industry (Firm 1 and Firm 2), compete in quantities, and firm A moves first. (Stackelberg duopoly) [2 marks] v) There are two firms in the industry (Firm 1 and Firm 2), compete in prices, and choose prices simultaneously (Bertrand duopoly) [2 marks] b) How the solutions would change in (iii), (iv) and (v) if TC₁ = 10Q1 and TC₂ = 20Q₂? [8 marks] c) How would the solutions change in (iii) and (iv) if there are three firms with TC₁= 10Q and TC₂ = 2002 and TC3 = 20Q? [7 mark] A market has a demand curve given by Q = 120-2P. All suppliers have identical total cost, TC= 20Q and produce homogeneous goods. a) For each of the following market structures, compute the output produced by each firm (if possible), the total industry output, the market price and each firm's (if possible) profit. i) There is only one firm in the industry (Monopoly) [2 marks] ii) There are many small firms in the market (Perfect Competition) [2 marks] iii) There are two firms in the industry (Firm 1 and Firm 2), compete in quantities, and choose quantities simultaneously (Cournot duopoly) [2 marks] iv) There are two firms in the industry (Firm 1 and Firm 2), compete in quantities, and firm A moves first. (Stackelberg duopoly) [2 marks] v) There are two firms in the industry (Firm 1 and Firm 2), compete in prices, and choose prices simultaneously (Bertrand duopoly) [2 marks] b) How the solutions would change in (iii), (iv) and (v) if TC₁ = 10Q1 and TC₂ = 20Q₂? [8 marks] c) How would the solutions change in (iii) and (iv) if there are three firms with TC₁= 10Q and TC₂ = 2002 and TC3 = 20Q? [7 mark]

Answer rating: 100% (QA)

a i Monopoly Output produced by firm 1202 60 units Total industry output 60 units Market price 1202 60 Profit 60 20 x 60 1200 ii Perfect Competition O... View the full answer