Consider there is a market The market demand is Q = 100- P where Q = QA + QB Fir
ID: 1185244 • Letter: C
Question
Consider there is a market The market demand is Q = 100- P where Q = QA + QB Firm A and B each have MC(marginal costs) = AC(average costs) = 10 Each firm has a capacity of 40 units. products are perfect substitutes. Firm A and Firm B are competitors. How much does each firm produce? What is the equilibrium P and Q? How much profit does each firm make? Firm A and Firm B are cournot-type competitors, but Firm A is a stackleberg leader,How much does each firm produce? What is the equilibrium p and Q? How much profit does each firm make? Firm A and Firm B are Bertrand competitors and that if both firms pick the same price, the market output is divided equally. What is the equilibrium P and Q? How much profit does each firm earn? Suppose a firm, for a cost, C, can increase its capacity to 50 units and lower its cost to AC = MC = 0. Solve and draw a matrix showing the potential outcomes of the two firms(A innovates, B doesn't; B innovates, A doesn't; both innovate; neither innovate) for Case 1 and Case 2 above.Explanation / Answer
For Cournet Solution in Part A ) Each firm max. his own profit ; inverse demand function is p = 100 - Q1 - Q2 ; equating MR1 = MR2 = MC = 10 ; we get 100 - 2Q1 - Q2 = 10 for firm 1 ; 100 - 2Q2 - Q1 = 10 for form 2 ; solve to get Q1 = Q2 = 30 , at p = 40 . profit (1) = TR(1) - TC(1) = 40*30 - 10*30 = 900 ; same for second firm .