Suppose that the market demand curve is defined as P = a - bQ, a, b > 0 and Q = Q₁ + Q₂- Here, P is the market price, and Q is the total quantity supplied to the market. Q₁ and Q₂ are the quantities supplied by the firm 1 and 2, respectively. (1) On the plane of Q₁ and Q2, show and explain the equilibrium of duopoly and cartel. respectively.
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- ASAP Bertrand competition with differentiated goods. Firms 1,2 with demand functions Q1 = 10 – 3P1 + 2P2 , Q2 = 10 – 3P2 + 2P1 and marginal costs C1 = 6, C2 = 4. i) Find the Nash Equilibrium prices, quantities and individual profits. ii) The firms agree to form a cartel. Find the prices, quantities, cartel profits and individual profits under the cartel agreement. iii) Which firm has a reason to suggest the cartel, and is the cartel sustainable or not? Depict and explain the cartel game in an appropriate way. If it is sustainable, explain. If no, explain and suggest a mechanism that can make it sustainable a) if the deal is for one period only b) if the deal is renewed each period over 5 periods.Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC = 20q, + 10 TC2 = 20q, + 10 d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game е.Consider a hypothetical demand schedule for monosodium glutamate (MSG). Suppose that Ajinomoto holds 50% of the market, Jiali holds 30% of the market, and Quingdao holds 20% of the market. Suppose the three firms agree to form a cartel to fix production of monosodium glutamate. Assume marginal cost equals zero, and the output is split equally across the firms. Price of MSG ($ per pound) Quantity of MSG demanded (millions of pounds) $8 0 $7 20 $6 30 $5 40 $4 60 $3 90 $2 110 $1 180 $0 300 What quantity maximizes the cartel's profit? a.110 million pounds b.90 million pounds c.300 million pounds d.20 million pounds Suppose Ajinomoto's marginal cost remains equal to zero, but for Jiali and Quingdao, marginal costs rise above zero. How would this affect the incentive of Ajinimoto to act noncooperatively and change its output? a.Ajinomoto will have an incentive to increase its output of MSG. b.Ajinomoto will not have an incentive to change its…
- 3. Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 - 2Q. The cost function for each firm is C(Q) = 4Q. The equilibrium output of each firm is: a) 8 b) 16 c) 32 d) 36 How do I .solve this in detailed steps?Consider two price-setting oligopolies supplying consumers in a certain region of a country. Firm 1 employs many of the people living there and the local government subsidizes its operations. In all other respects, the firms are identical-they have the same constant marginal cost, MC = 4, and produce the same good. The demand function for Firm 1 is q1 = 600 - 50p1 - 20p2 and for Firm 2 is q2 = 600 - 50p2 - 20p1, where p1 is Firm 1's price and p2 is Firm 2's price. a. What are the Nash-Bertrand equilibrium prices and quantities without the subsidy? b. What are they if Firm 1 receives a per-unit subsidy of S = 1? Compare the two equilibria.Consider a duopoly with inverse demand of P(Q) = 20 – Q, where Q = q4 + qg. Each firm has costs of MC = AC = 4. These firms decide to form a cartel. What is the market quantity sold by the cartel and at what price is each unit sold?
- Only two firms, ABC and MNO, sell a particular product. The following table shows the demand curve for their product. Each firm has the same constant marginal cost of $4 and zero fixed cost. Quantity Demanded (Units) 0 5 10 15 20 25 Price (Dollars per unit) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 30 35 40 45 50 55 60 65 70 Total Revenue (Dollars) 0 65 120 165 200 225 240 245 240 225 200 165 120 65 0 Total Cost (Dollars) 0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 Refer to the table above and explain: A). If ABC and MNO operate to jointly maximize profits, then what is the price? $9 B). If ABC and MNO operate to jointly maximize profits, then what quantity is sold? 25 I Profit (Dollars) 0 45 80 105 120 125 120 105 80 45 0 -55 -120 -195 -280 C). If ABC and MNO operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn? $62.5 D). ABC and MNO agree to maximize joint profits. However, while ABC produces the agreed-upon amount,…In the long-run, the amount of economic profits: for firms under monopolistic competition tend to diminish so that no more than normal profits can be earned, because entry barriers are fairly low, unless they can successfully and continuously differentiate their product or service. for (unregulated) monopoly firms always tends downward toward zero because consumers easily find close substitute goods or services. for firms under perfect competition will tend to get ever higher because free entry of new firms adds to the profits of the existing firms in the market. O for firms under perfect competition will tend to get higher over time because small-sized firms are constantly investing large sums of money in the latest production technologies and in innovations through research and development (R&D). MacBook Pro G Search or type URL 24 5 7Consider a Bertrand duopoly with inverse demand of P(Q) = 20 – Q, where Q = q4 + qB and firm A is the leader. Each firm has costs of MC = AC = 4. Answer the following questions: 1.What are the reaction functions of each firm? 2.What is the Bertrand equilibrium amount of units sold by each firm? 3.What is the market quantity and price?
- Suppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.Consider two identical firms with similar cost functions given by C1 = cq1 and C2 = cq2. The inverse demand function for the good Q is given by P = a – Q, where Q = q1 + q2. 1. Solve for the equilibrium price, equilibrium quantity and the profit of each firm under: (quasi-competitive model; cartel model; cournot solution model)2. Compare the results of your calculations in item #1 using a graphical illustrationConsider an oligopoly in which firms choose quantities. The inverse market demand curve is given by P = a - b (9₁ +92), where 9₁ is the quantity produced by Firm 1, and 92 is the quantity produced by Firm 2. Each firm has a marginal cost equal to c. 1. What is the equilibrium market quantity if the two firms acted as a cartel (i.e., attempt to set prices and outputs together to maximize total industry profits). How about the equilibrium market price? 2. Instead of cartel, suppose now firm 1 acts as the leader and firm 2 acts as the follower. What is the Stackelberg equilibrium quantities determined by each firm? What is the equilibrium market price? π2 3. Find using the Stackelberg quantities and price. Whose profit is higher?
