a) There is initially 1 firm in the fridge market. The firm faces a cost function: C(q)ı = 20q1 The market demand is given as: P = 140 – Q i) How much will this firm produce, what price will it charge and how much profit will it make? ii) Suppose now a second firm enters the market whose cost function is identical to the first firm's cost function. What will be the equilibrium price, output and profit for each firm if the firms behave like Cournot competitors iii) Determine the stackelberg equilibrium (price, output and profit for each firm) if firm 1 is the first mover and firm 2 the second mover

a) There is initially 1 firm in the fridge market. The firm faces a cost function: C(q)ı = 20q1 The market demand is given as: P = 140 – Q i) How much will this firm produce, what price will it charge and how much profit will it make? ii) Suppose now a second firm enters the market whose cost function is identical to the first firm's cost function. What will be the equilibrium price, output and profit for each firm if the firms behave like Cournot competitors iii) Determine the stackelberg equilibrium (price, output and profit for each firm) if firm 1 is the first mover and firm 2 the second mover

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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