Question: There are two rms. i and j competing os-'er quantity. Each fmu produces a homogenous good at the same marginal cost {c}. and fixed costs

 There are two rms. i and j competing os-'er quantity. Each

There are two rms. i and j competing os-'er quantity. Each fmu produces a homogenous good at the same marginal cost {c}. and fixed costs are F = D. Market demand is p(Q]I = a bQ. where p is price. Q = qr (11 is the total quantityr of output produced and sold by all firms in the market. :11 is the quantity of output for fmu i. qj is the quantity of output for firm j. b 3* C]. and It} i\" c '11 a. Carefully,r derive firm j's best response function. Plot rm j is best-response function from question three above in a two- dimensional graph with (11 on the 1.'ertical axis and [H on the horizontal axis. (i) Illustrate how an increase in marginal cost impacts firm j*s best-response function. (ii) Explain the important economic implication for firm j from an increase in marginal cost

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!