Now, assume your buffalo wing firm is in a Cournot oligopoly with 3 additional firms. The market elasticity of demand for buffalo wings is -0.70. Find your firm’s elasticity of demand. Now find the profit-maximizing price for your firm if your marginal cost is $3.70.
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In this assignment, we’re assuming you’re a manager of different types of buffalo wing restaurants. I’ll give different scenarios- some will require math and others will require writing.
Cournot Oligopoly
2. Now, assume your buffalo wing firm is in a Cournot oligopoly with 3 additional firms. The market
Now find the profit-maximizing price for your firm if your marginal cost is $3.70.
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- Now, assume your buffalo wing firm is in a Cournot oligopoly with 3 additional firms. The market elasticity of demand for buffalo wings is -0.70. Find your firm’s elasticity of demand. Now find the profit-maximizing price for your firm if your marginal cost is $3.70.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.Two firms operate in a Cournot Duopoly with an inverse market demand function: P = 180 – 3Q, where Q = q1 + q2. Firm 1 has a total cost structure; TC1 = 50 + 2q1 + 2q1 2 and firm 2 had a total cost structure: TC2 = 100 + 3q2 + 3q2 2 . Answer the following questions: a. If both firms wish to compete, what is the optimal quantity for each firm (qi) and the market price? b. What are the profits for each firm from the strategy in part a? c. If both firms choose to collude and not directly compete, what is the new price, quantity, and profits for each firm?
- Two firms engage in Cournot competition in the Everlasting Gobstopper industry. The price elasticity of demand is -2. Firm 1 has a constant marginal cost of $365.00 per unit, and firm 2 has a constant marginal cost of $602.25 per unit. If the two firms are currently in equilibrium, what is firm 2's share of the market? Enter your answer as a decimal, rounded to two places if necessary.What are the distinguishing features of oligopoly? Why are breakfast cereals made by firms in oligopoly? Why isn't there monopolistic competition in that industry? Business Week reported that Energizer is gaining market share against competitor Duracell and its profit is raising despite the sharp rise in the price of zinc, a key battery ingredient. In what type of market are batteries sold?Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on). What would the perfectly competitive equilibrium price and quantity be? What would be the consumer surplus and producer surplus? Draw each firm’s residual inverse demand curve. Calculate the Cournot-Nash equilibrium price and quantity. What is the total consumer surplus, total producer surplus across the two firms, and deadweight loss?
- At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, “. for the past several years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg's and its largest rival advertise, each company earns $0 billion in profits. When neither company advertises, each company earns profits of $10 billion. If one company advertises and the other does not, the company that advertises earns $52 billion and the company that does not advertise loses $2 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising? Instruction: Enter your response as a percentage rounded to the nearest whole number. percentThe following problem is a mixture of a Cournot/Bertrand duopoly Assume the following demand functions for a differentiated duopoly: P1 = 100 – 0.5Q1 – 0.4Q2 & P2 = 100 – 0.5Q2 – 0.4Q1. There are no costs. The first firm plays Cournot (selects Q) and the second firm plays Bertrand (selects P). Show the following:(i)Both are better off (in terms of profit) if they play Cournot(ii)If they play Bertrand, the first firm would have an incentive to shift to Cournot (or, the firm that plays Bertrand is worse off if the other firm plays Cournot and slightly better if both play Bertrand)The New York Times reports that Wal-Mart has decided to challenge Netflix and enter the online DVD-by-mail market. Because of economies of scale, Wal-Mart has a slight cost advantage relative to Netflix. Wal-Mart is considering the use of a limit pricing strategy. It can enter the market by matching Netflix on price. If it does, and Netflix maintains its price, then both firms would earn $5 million. But if Netflix drops its price in response, Wal-Mart would have to follow and would earn $2 million; Netflix would earn $3 million. Or Wal-Mart could enter the market with a price that is below Netflix's current price but above its marginal cost. If it does, Netflix would make one of two moves. It could reduce its price to below that of Wal-Mart. If it does, Wal-Mart will earn a profit of $0, and Netflix will earn a profit of $2 mil- lion. Or Netflix could keep its present price. If Netflix keeps its present price, Wal-Mart can keep its present price and earn $6 million (while Netflix earns…
- Two firms engage in Cournot competition in the Everlasting Gobstopper industry. The price elasticity of demand is-2. Firm 1 has aconstant marginal cost of $110.00 per unit, and firm 2 has a constant marginal cost of $181.50 per unit. If the two firms are currently inequilibrium, what is firm 2's share of the market? Enter your answer as a decimal, rounded to two places if necessary.______ Please show all stepsConsider the following figure familiar from the lecture on differentiated oligopoly. A D P2 F P2 -4 H P1 Valuation for Firm 1 (v1) Are the following statements true or false? 1. When prices are p, and p2, consumers in areas B, C, D, F, G, and I purchase from Firm 1. 2. When prices are p, and p,, consumers in area H do not buy from either Firm. 3. When prices are p, and p2, consumers on the boundary between areas B and Care indifferent between purchasing the product from Firm 1 or Firm 2. 4. Suppose Firm 1's price is fixed at p,. If Firm 2 changes its price from p, to p2 - 4, then consumers in areas E, F, and G will switch from buying from Firm 1 to buying from Firm 2. 5. Suppose there are no consumers in areas A and B, but there are consumers in all the other regions, and suppose that Firm 2's marginal cost is zero. Then p, cannot be profit maximizing for Firm 2. Valuation for (Za) z wWhich of the following best represents the pricing behavior of firms in an oligopolistic market? A) Stay*Put Clothespins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. B) Unykdrugs, Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve such that the market for its product clears, knowing it will not face competition due to patents it holds on its products. C) Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profit due to other hardware stores also looking for niches. D) Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration.
