• Question #21: Consider a Leader-Follower duopoly, the firms face an (inverse) demand function: Pb 618 - 25 Qb. The marginal cost for firm 1 (The Leader) is given by mcl = 18 Q. The marginal cost for firm 2 (The Follower) is given by mc2 = 8 Q. %3D How much consumer surplus is created by industry transactions ? (Assume firm 1 has a fixed cost of $ 415 and firm 2 has a fixed cost of $ 608 .)

• Question #21: Consider a Leader-Follower duopoly, the firms face an (inverse) demand function: Pb 618 - 25 Qb. The marginal cost for firm 1 (The Leader) is given by mcl = 18 Q. The marginal cost for firm 2 (The Follower) is given by mc2 = 8 Q. %3D How much consumer surplus is created by industry transactions ? (Assume firm 1 has a fixed cost of $ 415 and firm 2 has a fixed cost of $ 608 .)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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• Question #21: Consider a Leader-Follower duopoly, the firms face an (inverse) demand function: Pb = 141 - 3 Qb. The marginal cost for firm 1 (The Leader) is given by mc1 = 8 Q. The marginal cost for firm 2 (The Follower) is given by mc2 = 2 Q. %3D How much consumer surplus is created by industry transactions ? (Assume firm 1 has a fixed cost of $ 154 and firm 2 has a fixed cost of $ 439 .) • Question #22: Consider a Leader-Follower duopoly, the firms face an (inverse) demand function: Pb = 141 - 3 Qb. The marginal cost for firm 1 (The Leader) is given by mc1 = 8 Q. The marginal cost for firm 2 (The Follower) is given by mc2 = 2 Q. How much DWL is created by the Leader-Follower industry structure ? (Assume firm 1 has a fixed cost of $ 154 and firm 2 has a fixed cost of $ 439 .)
= Suppose the inverse demand for a particular good is given by P 1200 12Q. Furthermore, there are only two firms, A and B. Firm A's marginal cost is a constant $25, and Firm B's marginal cost is a constant $20. Assume these two firms engage in Stackelberg competition, where Firm A moves first. If we assume that the firm with the lowest costs could supply the entire market, then the deadweight loss due to the market power these two firms exert through Stackelberg competition equals $_____. [Round your answer to two decimals.]
Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.
Suppose a market is served by two firms (a duopoly). The market demand function given by P = 1200 - Q_{1} - Q_{2} where Q_{1} is the output produced by firm and Q_{2} is the output produced by firm 2 . Firm cost of production is given by the function C(Q_{t}) = 120Q_{t} and firm 2's cost of production is given by the function C(Q_{2}) = 120Q_{2} The average cost of firm 1 is given by A*C_{1} = 120 and the average cost of firm 2 is given by A*C_{2} = 120 Marginal profit function for firm 1: Delta pi 1 Delta Q 1 equiv1080-2Q 1 -Q 2; (d*pi_{2})/(Delta*Q_{2}) = 1080 - Q_{1} - 2Q_{2} Marginal profit function for firm 2: What will be the equilibrium profit levels earned by the Stackelberg leader firm and the Stackelberg follower firm?
Suppose a market is served by two firms (a duopoly) The market demand function given by P = 1200 - O_{1} - O_{2} where is the output produced by firm 1 and is the output produced by firm 2 Q_{1}*Q_{2} Firm I's cost of production is given by the function C(Q_{1}) = 120Q_{1} and firm 2's cost of production is given by the function C(Q_{2}) = 120Q_{2} The average cost of firm is given by A*C_{1} = 120 and the average cost of firm 2 is given by A*C_{2} = 120 Marginal profit function for firm 1 (d*pi_{1})/(Delta*Q_{1}) = 1080 - 2Q_{1} - Q_{2} Marginal profit function for firm 2 (Delta*pi_{2})/(Delta*Q_{2}) = 1080 - Q_{1} - 2Q_{2} What will be the equilibrium profit levels earned by the stackelberg leader firm and the stackelberg follower firm?
Two firms face the same inverse demand curve: P= 370– q, – 92 . Both firms have the same constant marginal cost: MC = 10. (a) %3D if both firms choose their output levels simultaneously, how much profits and consumer surplus will be earned in equilibrium? (b) Firm 1 is offered the following deal: by paying Z it can either (i) acquire a new technology that lowers its marginal cost to zero or (ii) have to opportunity to produce output before firm 2. Which option would it take and what is the maximum Z it would be willing to pay?
Suppose that a price-taker firm has a marginal cost function given by: MC= 20+0.5q. The firm could join a cartel in its industry and agree to a quota of 5 units. The collusion drives the price of the good from $25.45 to $55.00. Calculate the producer surplus of this firm when they produce the quota. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Problem 3. Firm 1, Firm 2 and Firm 3 are the only competitors in a market for a good. The price in the market is given by the inverse demand equation P=10 (Q1+Q2+Q3) where Q, is the output of Firm i (i=1,2,3). Firm 1's total cost function is C₁ = 4Q₁+1, Firm 2's total cost function is C₂ = 2Q2 +3, and Firm 3's total cost function is C3 = 3Q3 + 2. Each firm wants to maximize its profits and they simultaneously choose their quantities. Determine a Nash equilibrium in this market.
Two firms are engaged in Cournot (simultaneous quantity) competition. Market-level inverse demand is given by P = 160 − 4Q Firm 1 has constant marginal costs of MC1 = 8, while Firm 2 has constant marginal costs of MC2 = 24. 1) Does there exist a low enough positive marginal cost for firm 1 such that firm 1 acts like a monopoly in this market, if so what is the MC if not why?
2. Stackelberg Firms 1, 2 and 3 compete in quantities. The inverse market demand is given by p = 400 (91 +92 +93), where 91, 92 and q3 are the quantities produced by firms 1, 2 and 3, respectively. The marginal cost for firm 1 is c₁ = 20, and the marginal cost for both firm 2 and firm 3 is 40. The order of play is as follows: Firm 1 first sets a quantity q₁. Then, firms 2 and 3 observe q₁ and simultaneously set q2 and 93. Each firm sets its quantity to maximize its own profits. (a) Let us first consider the optimal action of firm 2. Given a value q₁ initially set by firm 1 and a value of q3 set by firm 3, what is the value of q2 that maximizes the profits of firm 2? Hint: Your answer should provide q2 in terms of 91 and 93. (b) Notice that, after firm 1 sets q1, a subgame starts, in which firms 2 and 3 simultaneously set q2 and 93. Given 91, find the values of q2 and q3 that firms 2 and 3 must set in a Subgame Perfect Nash Equilibrium. Hint: Your answer should provide q2 and q3 in…
C2) Consider an industry with only two firms: firm A and firm B. The industry's inverse demand is P(Q) = 400 - ¹1/Q, 10 where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are no fixed costs and no barriers to exit the market. a) Suppose that the two firms engage in Cournot competition. Find the equilibrium price PNE in the industry, the equilibrium outputs QANE and QBNE, as well as the profits NEA and NEB for each firm. marks] b) Suppose the two firms engage in Stackelberg competition, with firm A moving first, and firm B moving second. Find the equilibrium price PS in the industry, the equilibrium outputs QS and QBS, as well as the profits π and TSB for each firm. в c) For this subquestion only, suppose that firm B has a fixed cost of $200 000: What will firm B's optimal decision be, and what will be the resulting market structure? Now assume that instead of having two firms in the market, we have a monopoly facing the inverse…
Firm 1 and firm 2 are Bertrand duopoloists. Firm 1 has a marginal cost of $6.00 per unit, and firm 2 has a marginal cost of $8.01 per unit. The demand for their product is p=23.00−Q, where Q is the total quantity demanded. How much does each firm sell in equilibrium? Assume that prices can only be set to the nearest cent, firms split the market if they set the same price, and there are no fixed costs. Firm 1 production:______ Firm 2 production:______ What are the profits for each firm in equilibrium? Firm 1 profit: $______ Firm 2 profit: $______