Suppose firm A and firm B produce differentiated goods. The inverse demand curve for firm A...
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Suppose firm A and firm B produce differentiated goods. The inverse demand curve for firm A is PA 20- 9A-9B. The inverse demand curve for firm B is PB = 20 - 9A (b + 1)qB where b follows from your student number. The cost functions of the two firms are the same: C₁ = 5Qi, where i = A, B. a) Find the best response functions for each firm in a Nash-Cournot equilibrium and illustrate them in a diagram. (4 marks) b) What are the Nash-Cournot equilibrium quantities? (2 marks) c) Suppose firm B receives a £3 subsidy per unit produced from the government. What are the new Nash-Cournot equilibrium quantities? (4 marks) Suppose firm A and firm B produce differentiated goods. The inverse demand curve for firm A is PA 20- 9A-9B. The inverse demand curve for firm B is PB = 20 - 9A (b + 1)qB where b follows from your student number. The cost functions of the two firms are the same: C₁ = 5Qi, where i = A, B. a) Find the best response functions for each firm in a Nash-Cournot equilibrium and illustrate them in a diagram. (4 marks) b) What are the Nash-Cournot equilibrium quantities? (2 marks) c) Suppose firm B receives a £3 subsidy per unit produced from the government. What are the new Nash-Cournot equilibrium quantities? (4 marks)
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Answer P 20VB PB 20A b11 VB CP50 Best Respons fonction CA 20O... View the full answer
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