Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constantmarginal cost c and no fixed cost. Inverse linear demand is given by p = 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, andprofits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in thesense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post - mergerequilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? Clearly explain the step by step solution, Please be sensibleand give the complete answer for the quation asked. Please solve in detail. Dont give me the chatgpt answers

Answered: Consider a homogeneous product industry…

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

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post-merger equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? no copy paste answers or chatgpt
Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct.
Consider a Cournot Duopoly model. The inverse demand for their products is given byP = 200 − 6Q, where Q is the total quantity supplied in the market (that is, Q = Q1 + Q2). Each firm has an identical cost function, given by TCi = 2Qi, for i = 1, 2.(a) In the Cournot model, what does each firm choose?(b) What is the timing of each firm’s decision?
QUESTION 12 Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities and have a constant marginal cost of 30. Demand in the industry is given by D(p) = 195 - p/2. Let q1 and q2 denote the quantities of firm 1 and 2, respectively. Derive the best resonse functions and the Nash equilibrium in quantities. Which of the following statements are correct? [There may be more than one correct statement.] The Nash equilibrium quantity for each firm is 40. O The Nash equilibrium quantity for each firm is 60. The reaction function of firm 1 is given by q1 = 60 - (92)/2. The reaction function of firm 1 is given by q1 = 45 - (92)/2. The reaction function of firm 1 is given by q1 = 90 - (92)/2. O The Nash equilibrium quantity for each firm is 30. None of the above. 000
Suppose that Raleigh and Dawes are the only sellers of bicycles in the UK. The inverse market demand function for bicycles is ?(?)=200−2?. Both firms have the same total cost function: ??(?)=12? and the same marginal cost: ??(?)=12.Suppose this market is a Stackelberg oligopoly and Raleigh is the first mover.a) Write down a formula for the reaction function of Dawes.b) Calculate the equilibrium quantity that each firm produces and the equilibrium price in the market.c) At the Stackelberg equilibrium, how much profit does each firm make?Suppose now that the two firms decide to act like a single monopolist.a) What will the total quantity of bicycles sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium.b) Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly.c) For the…
Suppose the total demand for specialty coffee per hour in Ruston is Q = 640 - 80P. There are six (n = 6) monopolistically competitive firms currently in the market selling some variety of specialty coffee, each with total cost curves given by: TC₁ = 20+q; +0.0125q²| a. Find the proportional demand faced by one coffee shop, denoted Firm i. That is, suppose the firms have equal market share and determine the demand function for a single firm. b. Calculate the optimal quantity produced by Firm i. c. Calculate Firm i's profits. Will there be entry or exit by other coffee shops over time? d. Provide a generic graph the long-run outcome for Firm i given your prediction from (c). Label curves, axes, and intersection points.
The inverse demand for a homogenerous-product STakelberg duopoly is P=18,000-5Q. The cost structures for the leader and the follower, respectively, are CL(QL=2,000QLand CF(QF)=4000Qf. What is the follower's reaction function? Determine equilibrium output level for both leader and follower. Determine the equilibrium market price. Determin the profits of the leader and the follower. Please answer correct please asap please Don't answer by pen paper plz
A community's demand for monthly subscription to a streaming music service is shown by the following table. Assume that there are only two firms serving this market (Firm A and Firm B), each firm offers the same quality of service and music selection, and that each firm’s marginal cost is constant and equal to 0 (zero). (please refer to table provided) If this market were highly competitive instead of a duopoly, the quantity of streaming movie subscriptions purchased each month would be ______ If the two firms agreed to each supply one half of the quantity a monopoly would supply, the contract would specify that each firm would supply ____
Consider an industry composed of only two firms, each producing an identical product. The two firms have identical constant marginal costs of production, zero fixed costs, and behave as leader-follower (Stackelberg duopolists). Which of the following conditions will hold in equilibrium? a) at least one firm makes zero profit no b) both firms make decisions at the same time yes c) the firm that moves first will make lower profit than the other firm yes d) one of the firms chooses its price first no no e) the combined profit of Stackelberg duopolists is higher than that of Bertrand duopolists yes f) the equilibrium price is greater than the equilibrium price under perfect competition but less than the equilibrium price in a Cournot model of duopoly > >
Consider the following 2-firm (firm 1 and 2) model of Bertrand duopoly with differen- tiated products. Demand for firm i is q:(Pi, P;) = a – Pi – bi.Pj costs are zero for both firms. The sensitivity of firm i's demand to firm j's price is measured by bị. (a) First suppose b1 # b2. Find the equilibrium prices p1 and p2. (b) Deduce that if the two firms are identical, they choose the same price p = 216) where b = b1 = b2. а
Consider a Cournot Duopoly model. The inverse demand for their products is given byP = 200 − 6Q, where Q is the total quantity supplied in the market (that is, Q = Q1 + Q2). Each firm has an identical cost function, given byT Ci = 2Qi, for i = 1, 2.(a) In the Cournot model, what does each firm choose?(b) What is the timing of each firm’s decision?(c) Find the Nash equilibrium quantities (Q∗1, Q∗2)?(d) What is the equilibrium price? Just help with c and d here please
Consider a duopoly with a demand curve given by P = a –bQ, where a and b are positive constants and Q is the total production by the two firms. Firms sell identical goods and have an identical constant marginal cost of production c. Fixed costs are equal to zero. We assume firms choose quantities simultaneously (Cournot competition). a. Obtain the first order condition of profit maximization for each firm. Use graphical analysis and economic intuition to explain what they represent. [30%] b. Obtain the profit maximizing quantity for each firm. Explain what they represent using game theory concepts. [20%] c. Demonstrate using relevant graphical analysis and economic intuition that the results obtained in b are not a Pareto Optimum for the firms involved. [20%] d. How would the graphical analysis in part a change if Firm A had a fixed cost of production?

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