Consider an oligopoly in which firms choose quantities. The inverse market demand curve is given by...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider an oligopoly in which firms choose quantities. The inverse market demand curve is given by P = a - b (q₁ + 92), where q₁ is the quantity produced by Firm 1, and q2 is the quantity produced by Firm 2. Each firm has a marginal cost equal to c. 1. What is the equilibrium market quantity if the two firms acted as a cartel (i.e., attempt to set prices and outputs together to maximize total industry profits). How about the equilibrium market price? 2. Instead of cartel, suppose now firm 1 acts as the leader and firm 2 acts as the follower. What is the Stackelberg equilibrium quantities determined by each firm? What is the equilibrium market price? 3. Find using the Stackelberg quantities and price. Whose profit is higher? J1 J₂ Consider an oligopoly in which firms choose quantities. The inverse market demand curve is given by P = a - b (q₁ + 92), where q₁ is the quantity produced by Firm 1, and q2 is the quantity produced by Firm 2. Each firm has a marginal cost equal to c. 1. What is the equilibrium market quantity if the two firms acted as a cartel (i.e., attempt to set prices and outputs together to maximize total industry profits). How about the equilibrium market price? 2. Instead of cartel, suppose now firm 1 acts as the leader and firm 2 acts as the follower. What is the Stackelberg equilibrium quantities determined by each firm? What is the equilibrium market price? 3. Find using the Stackelberg quantities and price. Whose profit is higher? J1 J₂
Expert Answer:
Answer rating: 100% (QA)
To solve this problem well follow these steps Find the equilibrium market quantity and price under cartel behavior Determine the Stackelberg equilibri... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Consider an oligopoly in which firms choose quantities. The inverse market demand curve is given by P = 280 - 2(X + Y ), where X is the quantity of Firm 1, and Y is the quantity of Firm 2. Each firm...
-
Let P, Q, R be points on a common line with Q separating P and R. Let P', Q', R' be points on another common line with Q' separating P' and R'. Assume that |PQ| = |P'Q'| and |QR| = |Q'R'|. Prove that...
-
A homogeneous products oligopoly consists of four firms, each of which has a constant marginal cost MC = 5. The market demand curve is given by P = 15 - Q. a) What are the Cournot equilibrium...
-
In Exercises 13 through 24, compute the derivative of the given function and find the equation of the line that is tangent to its graph for the specified value x = c. f(x) = -2 X ; c = - 1
-
Last year, Dogwood Company had net sales of $9,375,000 and cost of goods sold of $4,812,000. Dogwood had the following balances: Required: Round answers to one decimal place. 1. Calculate the average...
-
In Problems 1 through 16, apply the eigenvalue method of this section to find a general solution of the given system. If initial values are given, find also the corresponding particular solution. For...
-
You need to understand the approach described in question 3 in More Genetic TIPS before answering this question. A muscle-specific gene was cloned and then subjected to promoter bashing. As shown...
-
Adria Lopez created Success Systems on October 1, 2013. The company has been successful, and Adria plans to expand her business. She believes that an additional $ 86,000 is needed and is...
-
Data manipulation language (DML) provides a number of capabilities that allow you to build custom queries of existing data. What are two capabilities you might use to limit the data you select or...
-
The owner of Neros company has hired you to analyze her company's performance and financial position, as well as the positions of Iits competitors, Centar and Xermix. However, the data Neros abtained...
-
A flexible budget performance report compares the differences between:
-
From the Tax Policy Center reading: rapid growth of both the elderly and the disabled populations has contributed to increased Social Security and Medicare spending. This growth has directly...
-
how to response this post I believe that one of the main impacts of cyberterrorism on American society is the destruction of critical infrastructure, which can cause direct harm to citizens and...
-
which is the study of human populations, including characteristics such as size, growth, density, distribution, movement, and other vital statistics.?
-
The border-adjustment feature of the House Republican tax plan is the key to cutting the corporate tax rateand stimulating economic growthwithout a major increase in the budget deficit. The tax would...
-
In which way do the licensed professions increase their earnings?
-
Using EXCEL VBA: Develop a function that will compute the cosineof x to a specified number of terms, n,using the following series. The returned value should be a double.Assume that a...
-
If there is an unrealized holding gain on available-for-sale investments, it is reported as?
-
You have a utility function given by U = 2I + 10I. You are considering two job opportunities. The first pays a salary of $40,000 for sure. The other pays a base salary of $20,000, but offers the...
-
Ethanol (i.e., ethyl alcohol) is a colorless, flammable liquid that, when blended with gasoline, creates a motor fuel that can serve as an alternative to gasoline. The quantity of ethanol motor fuel...
-
If the consumer has a positive marginal utility for each of two goods, why will the consumer always choose a basket on the budget line?
-
How can environmental agents that do not cause gene mutations contribute to cancer?
-
With regard to genotypes, what is a true-breeding organism?
-
With regard to biological evolution, which of the following statements is incorrect? Explain why. A. During its lifetime, an animal evolves to become better adapted to its environment. B. The process...
Study smarter with the SolutionInn App