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Author Question: Consider a market with (inverse) demand p = 100 - 2Q. There are two firms in the market with ... (Read 26 times)

Frost2351

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on: Jul 1, 2018
Consider a market with (inverse) demand p = 100 - 2Q. There are two firms in the market with constant marginal and average costs of 10.
 
  a. Determine the Cournot equilibrium quantities and price
  b. What would be the collusive (joint-profit maximizing) price and quantity?
  c. Derive the deadweight loss from (i) Cournot Dupoly, (ii) Collusion, and (iii) Perfect competition in this market with the two firms.

Question 2

If a product which costs 8 is sold at 10, the mark-up is
 
  A) 2.
  B) 25.
  C) 20.
  D) None of the above


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katheyjon

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Reply #1 on: Jul 1, 2018
Answer to Question 1

a. q1 = q2 = 15
p = 100 - 2(30 ) = 40
b. 100 - 4Q = 10 Q = 22.5, q = 11.25
p = 55
c. DWL from P.C. = 0
DWL from monopoly = .5(45 - 22.5 )(55  10 ) = 506.25
DWL from duopoly = .5(45  30 )(40  10 ) = 225

Answer to Question 2

B


Frost2351

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Reply 2 on: Jul 1, 2018
YES! Correct, THANKS for helping me on my review

amandalm

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Reply 3 on: Yesterday
:D TYSM

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