5. In a Cournot duopoly model where both firms have the same marginal cost and produce identical products, which of the following features is not true: a) The equilibrium price is somewhere between the competitive and monopoly level b) Each firm adjusts its price depending on the price charged by the other firm c) Each firm calculates its demand as the overall demand less the quantity it assumes the other will sell. d) The equilibrium price is the same for both firms e) The equilibrium price is higher than the one that would be attained under Bertrand competition

5. In a Cournot duopoly model where both firms have the same marginal cost and produce identical products, which of the following features is not true: a) The equilibrium price is somewhere between the competitive and monopoly level b) Each firm adjusts its price depending on the price charged by the other firm c) Each firm calculates its demand as the overall demand less the quantity it assumes the other will sell. d) The equilibrium price is the same for both firms e) The equilibrium price is higher than the one that would be attained under Bertrand competition

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…
Two firms produce identical products at zero cost, and theycompete by setting prices. If each firm charges a low price,then both firms earn profits of zero. If each firm charges ahigh price, then each firm earns profits of £30. If one firmcharges a high price and the other firm charges a low price,the firm that charges the lower price earns profits of £50, andthe firm charging the higher price earns profits of zero. (a) Which oligopoly model best describes this situation?(b) Write this game in normal form.(c) Suppose the game is infinitely repeated. Can theplayers sustain the "collusive outcome" as a Nashequilibrium if the interest rate is 50 percent? Explain. Please answer the a, b and c parts.
. What is the Nash equilibrium in this advertising war?a) Coke advertises; Pepsi does not advertise b) Pepsi advertises; Coke does not advertise c) neither of them advertises d) both of them advertise Explain the reasons for your answer? Was any other equilibrium position possible? advertise do not advertise pepsi-advertise coke profit=$50B coke profit =$20B PEPSI profit =$50B pepsi profit =$100B do not advertise coke profit =$100B coke profit =$80B pepsi profit =$20B PEPSI PROFIT =$80 B
The graph below shows a demand curve for a firm operating in an oligopolistic market. Kinked Demand Price 100 90 80 70 60 50 40 30 20 10 0 MR Quantity D 10 20 30 40 50 60 70 80 90 100 MC O relatively more elastic. O relatively more inelastic. O perfectly elastic. O perfectly inelastic. Compared to a price of $75, at a price of $60 demand is O
6. Two firms, Firm 1 and Firm 2 and are competing in quantities. The demand they are facing is given by p=1-91-92, with p being the price of the good, and 9₁ and 92 the quantities produced by firm 1 and 2 respectively. The total cost of firm 1 is TC1 (91) = 9₁ and the one of firm 2 is TC₂ (92) = 292. (a) Find the Cournot equilibrium. (b) The government decides that it wants to make the market more competitive. As such it decides to offer to Firm 1 a license to become the leader in the market. The licence costs F, and if Firm 1 buys it, it will be allowed to choose its quantity before Firm 2. What is the maximum Firm 1 would be willing to pay for this license?
Consider the model with monopolistic competition and full symmetry between the firms (internal returns to scale) in a single integrated market. Now assume that a new technology becomes available that reduces a firm's marginal cost of production by a given amount but requires a larger fixed-cost investment to implement. Suppose that all fırms adopt the new technology. How does this impact the equilibrium number of varieties and the equilibrium price? Show your work. Edit View Insert Format Tools Table
The most important factor that drives the long-run profit to zero in monopolistic competition is the elasticity of the market demand curve the elasticity of the firm's demand curve free entry and exit O the reaction of rival firms to a change in price What is one difference between the Cournot and Stackelberg models? O In Cournot, both firms make price decisions simultaneously, and in Stackelberg, one firm sets its price level first O In Stackelberg, both firms make price decisions simultaneously, and in Cournot, one firm sets its price level first O In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first O In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first O Profits are zero in Cournot and positive in Stackelberg
1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). a. Assume firm A chooses quantity first. Frim B observes this choice and then chooses its own quantity. What is Frim B's profit as a function of QA and QB? b. Firm B has MRB = 220 – 2QB – QA. What is firm B’s best response to an arbitrary QA selected by firm A? c. Given that firm A expects firm B’s best response, what is firm A’s profit as a function of QA? (Hint: the only unknown variable in the profit function should be QA) d. Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e. What is the equilibrium price, and how much profit does each firm collect?
are 13-7 sis and evenue $4 P2 MC FM/ ATC E OG AS SS AVC (oo) ubonq aviimoo loiteiloqo sol o bnal Po Demand MA Quantity ure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. 3) Refer to Figure 13-7. Which of the following statements describes the best course of action for the firm depicted in the diagram? * A) The firm should minimize its losses by producing Qy units and charging a price of P1. B) The firm should minimize its losses by producing Qy units and charging a price of P2. C) The firm should minimize its losses by producing Qy units and charging a price of Po. D) The firm should exit the industry because its price is less than its average total cost. 3) A 4) Refer to Figure 13-7. Which of the following is the area that represents the profit or loss experienced by the firm? A) A loss represented by the rectangle PivwPo. B) An accounting profit equal to P1vwPo. C)A loss represented by the rectangle P2uvP1. D) A loss…
In the context of a duopolistic market with firms competing a la Cournot, discuss the comparative static effect on the quantity produced by firms 1 of a unit tax t2 imposed on the output sold by firm 2.
Help me please
4. Duopoly quantity-setting firms face the market demand p = 150 – q1 – 42. Each firm has a marginal cost of $60 per unit a) What is the NE? b) What is the Stackelberg equilibrium when Firm 1 moves first?