Question-4 (Duopoly) There are two firms in the pumpkin industry: C and S. The demand function for pumpkins is q = 3, 2001, 600p. The total number of pumpkins sold at the market is q =qc+qs, where qc is the number that C firm sells and qs is the number that S firm sells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how many pumpkins they produces. 1. Every spring, each of the firms decides how many pumpkins to grow. They both know the local demand function and they each know how many pumpkins were sold by the other firm last year. In fact, each firm assumes that the other firm will sell the same number this year as its sold last year. So, for example, if firm S sold 100 pumpkins last year, firm C believes that firm S will sell 100 pumpkins again this year. If firm S sold 100 pumpkins last year, what does firm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year? 2. Suppose that in year 1, firm C produced 200 pumpkins and firm S produced 1,000 pumpkins. In year 2, how many would firm C produce? How many would firm S produce?
Question-4 (Duopoly) There are two firms in the pumpkin industry: C and S. The demand function for pumpkins is q = 3, 2001, 600p. The total number of pumpkins sold at the market is q =qc+qs, where qc is the number that C firm sells and qs is the number that S firm sells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how many pumpkins they produces. 1. Every spring, each of the firms decides how many pumpkins to grow. They both know the local demand function and they each know how many pumpkins were sold by the other firm last year. In fact, each firm assumes that the other firm will sell the same number this year as its sold last year. So, for example, if firm S sold 100 pumpkins last year, firm C believes that firm S will sell 100 pumpkins again this year. If firm S sold 100 pumpkins last year, what does firm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year? 2. Suppose that in year 1, firm C produced 200 pumpkins and firm S produced 1,000 pumpkins. In year 2, how many would firm C produce? How many would firm S produce?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.6IP
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