Two oligopolies (Firm A and Firm B) have access to the same the same technology and have
Question:
Two oligopolies (Firm A and Firm B) have access to the same the same technology and have similar costs. FC = 0 MC = AVC = ATC = $100 Assume the demand of the product is given below: P=1000-Q Remember Q= q_A+ q_B Where q_(A ) is production by firm A and q_B-is production by firm B (a) Assume that they compete with price. i. How low can the price would go? Explain ii. Obtain the competitive price, quantity produced and profits for each firm. (b) Assume not that the firm now can agree on production and decides to behave like a monopoly. i. Obtain the price of the product if they can keep the monopoly agreement and the qa and qb. ii. Obtain Economic profit for each firm iii. Using the logic of prisoner’s dilemma explain why it is difficult to maintain these agreements.
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey