3. Spicy City (SC) and Village Kitchen (VK) are the only two Chinese restaurants serv- ing...

 

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3. Spicy City (SC) and Village Kitchen (VK) are the only two Chinese restaurants serv- ing Mapo Tofu in Clairemont Mesa, San Diego. They use very similar methods to cook their Mapo Tofu, so they have no loyal customers. Let's suppose that the demand for Mapo Tofu in Clairemont Mesa is given by P = 35-Q where P is the price of an order of Mapo Tofu (in $), Q is the total orders of Mapo Tofu offered for sale in Clairemont Mesa. In addition, let's assume that it cost each restaurant $5 to produce each order of Mapo Tofu. (a) Find Spicy City and Village Kitchen's best-response functions qsc and qvK- (b) Find the Cournot equilibrium outputs, price and profit levels for Spicy City and Village Kitchen. Show your work.. (c) Suppose Spicy City and Village Kitchen decide to merge into a single chain restaurant (creatively named Spicy Kitchen) and split profit equally, effectively becoming a cartel in the market for Mapo Tofu in Clairemont Mesa. What is their cartel profit-maximizing price and quantity? What is the profit for each? 3. Spicy City (SC) and Village Kitchen (VK) are the only two Chinese restaurants serv- ing Mapo Tofu in Clairemont Mesa, San Diego. They use very similar methods to cook their Mapo Tofu, so they have no loyal customers. Let's suppose that the demand for Mapo Tofu in Clairemont Mesa is given by P = 35-Q where P is the price of an order of Mapo Tofu (in $), Q is the total orders of Mapo Tofu offered for sale in Clairemont Mesa. In addition, let's assume that it cost each restaurant $5 to produce each order of Mapo Tofu. (a) Find Spicy City and Village Kitchen's best-response functions qsc and qvK- (b) Find the Cournot equilibrium outputs, price and profit levels for Spicy City and Village Kitchen. Show your work.. (c) Suppose Spicy City and Village Kitchen decide to merge into a single chain restaurant (creatively named Spicy Kitchen) and split profit equally, effectively becoming a cartel in the market for Mapo Tofu in Clairemont Mesa. What is their cartel profit-maximizing price and quantity? What is the profit for each?

Answer rating: 100% (QA)

a Spicy City and Village Kitchens bestresponse functions qse and qvk Spicy Citys bestresponse functi... View the full answer