Economics: Industrial Economics Question: In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse demand function is P = 300 - 2 Q1, where Q = q1 + q2. Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following: 1. The Nash Equilibrium quantity produced by firm 1 q1* is Choices: A. 33.3 B. 38.3 C. 40 D. 35 2. The Nash Equilibrium quantity produced by firm 2 q2* is Choices: A. 15 B. 53.3 C. 20 D. 21.7 3. The Nash Equilibrium price is Choices: A. 126.7 B. 180 C. 200 D. 190
Economics: Industrial Economics
Question:
In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse demand function is P = 300 - 2 Q1, where Q = q1 + q2.
Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following:
1. The Nash
Choices:
A. 33.3
B. 38.3
C. 40
D. 35
2. The Nash Equilibrium quantity produced by firm 2 q2* is
Choices:
A. 15
B. 53.3
C. 20
D. 21.7
3. The Nash
Choices:
A. 126.7
B. 180
C. 200
D. 190
4. The Lerner Index for the market is closest to
Choices:
A. 0.29
B. 0.66
C. 0.43
D. 0.57
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