Consider a duopoly with each firm having different marginal costs. Each firm has a marginal cost...

 

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Consider a duopoly with each firm having different marginal costs. Each firm has a marginal cost curve MC₁ = 10 + 2Q; for i = 1, 2. The market demand curve is P = 20 - Q, where Q = Q₁ + Q₂. 1. What are the Cournot equilibrium quantities and price in this market? 2. What would be the equilibrium price in this market if the two firms acted as a profit-maximizing cartel (i.e., attempt to set prices and outputs together to maximize total industry profits )? 3. What would be the equilibrium price in this market if firms acted as price-taking firms (there are still only two firms)? 4. What is the Bertrand equilibrium price in this market? Consider a duopoly with each firm having different marginal costs. Each firm has a marginal cost curve MC₁ = 10 + 2Q; for i = 1, 2. The market demand curve is P = 20 - Q, where Q = Q₁ + Q₂. 1. What are the Cournot equilibrium quantities and price in this market? 2. What would be the equilibrium price in this market if the two firms acted as a profit-maximizing cartel (i.e., attempt to set prices and outputs together to maximize total industry profits )? 3. What would be the equilibrium price in this market if firms acted as price-taking firms (there are still only two firms)? 4. What is the Bertrand equilibrium price in this market?

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1 In Cournot equilibrium each firm chooses its output level to maximize its profit given the output level of the other firm Mathematically this means ... View the full answer