Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10. The firms agreed to collude. But firm 1 sets a P-Duopoly. Instructions: Use no decimals. a. Under these conditions, P1 = $ P2 = $ b. Calculate each firm's equilibrium output. Q1 = Q2 = c. Calculate the profit each firm earns in equilibrium. Firm 1: $ Firm 2: $
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Two firms are competing in a Bertrand setting. The demand and costs equations are: Q1 = 88–4P1+2P2, Q2 = 88–4P2+2P1; MC1 = 9; and MC2 = 10. The firms agreed to collude. But firm 1 sets a P-Duopoly.
Instructions: Use no decimals.
a. Under these conditions,
P1 = $
P2 = $
b. Calculate each firm's equilibrium output.
Q1 =
Q2 =
c. Calculate the profit each firm earns in equilibrium.
Firm 1: $
Firm 2: $
d. In this case,
A. Firm 1 was exposed to deception, and should have entered the market with P-
Monopoly .B. Firm 2 was exposed to deception, and should have entered the market with P-Monopoly.
C. Firm 2 was exposed to deception, and should have entered the market with P-Duopoly.
D. Firm 1 was dishonest, and soon will be ostracized by the industry.
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