Question: The inverse demand for tea is given by P = 8- 0.04 Q , where P is the price per a gram of tea and

The inverse demand for tea is given byP= 8- 0.04Q, wherePis the price per a gram of tea andQis the total number of grams of tea brought to market. There are two tea shops in the market. Shop 1's cost function is given byC1=0.01q1^2, whereq1is the number of grams of tea it brings to market. Shop 2's cost function is given byC2=0.01q2^2, whereq2is the number of grams of teait brings to market. Given that the two shops compete by setting output (Cournot), answer the following.

a) Identify shop 1's reaction function to shop 2's output to within 2 decimal places

q1=_____-______q2

b)Identify shop 2's reaction function to shop 1's output to within 2 decimal places

q2=-q1

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

An electricity provider has a natural monopoly. Its total production (and distribution) cost per month is TC= 1000+ 6q. The inverse demand for electricity is given by P= 150-2q, where q is expressed...

2. Soda Oligopoly Suppose that Pepsi and Coke compete as Cournot oligopolists in the production of soda. Demand for soda is given by P = 140 - 2Q where Q = qc + qp is the total number of cans of soda...

The market demand for recorder is given by: P = 260 - 5Q; where P = price per recorder and Q is the number of recorders. Currently, Firm A is the single seller in the market, and its total cost is:...

14. [-/4 Points] DETAILS HARMATHAP12 1.6.040. Complete the problem by using the accompanying gure, which shows a supply function and a demand function. (Assume price is measured in dollars.) p 40 30...

Suppose that demand for each cup of coffee sold by Baltimore's Sophomore Coffee is described by Q = 100 - 5P (and inverse demand is described by P = 20 - 0.2Q where P denotes the price per cup of...

Cournot and Betrand equilibria: 1. In the town of Middleofnowhere there are only two farmers and they are the only producers of milk. The local demand for milk is given by (P denotes price measured...

Ajax Limited and Brutus, LLC. are the only suppliers of services that calibrate the send/receive GPS tracking equipment on trucks that are used by various trucking companies to monitor their shipping...

The market (inverse) demand for cellphones is given by P = 200 - Q and the initial market supply curve is given by P = 100. Due to technological innovation, the firms' MC of production decreases and...

Please help answer question 8 and 9. QUESTION 8 2 points Save Answer Suppose that demand for each cup of coffee sold by Baltimore's Sophomore Coffee is described by Q = 100 - 5P (and inverse demand...

The Washington, D.C., region has one of the fastest-growing foreclosure rates in the nation, as 15,613 homes went into foreclosure during the one-year period ending in February 2008 (The Washington...

As volume increases, total cost increases and per-unit cost decreases. What type of linear cost function does this describe? Draw a simple graph of this type of cost function.

To be deductible, business expenses must be appropriate and helpful for generating a profit. True or False Prev 1 7 of 2 0 Next MacBook Pro Search or type URL

Consider the following information: State Probability Stock A Stock B Stock C Boom 0.65 0.09 0.04 0.03 Bust 0.35 -0.15 0.22 -0.03 What is the expected return on an equally weighted portfolio of these...

3. Behavior. Ask whether the trainees on-the-job behavior changed because of the training program. For example, are employees in the stores complaint department more courteous toward disgruntled...

Choose a well- known organisation (e. g. a retail company or a business with a high media profile) and collect as much information as you can about it: artefacts such as products; communications...

Choose one of the descriptive models (e. g. Harrison or Deal and Kennedy) and use it to analyse the culture of your organisation. 1 What are the main strengths and weaknesses of your organisational...