Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. economics
  3. assume that two firms are in a cournot oligopoly m

Assume that two firms are in a Cournot oligopoly market. Market demand is P=120 - Q...

70.2K

Verified Solution

Question

Economics

Assume that two firms are in a Cournot oligopoly market. Marketdemand is P=120 - Q where Q isthe aggregate output in the marketand P is the price. Firm 1 has the cost functionTC(Q1)=30 + 10Q1 and Firm 2 has the costfunction TC(Q2)=15 + 20Q2.

a) Write down the

Profit function of Firm 1:

Profit function of Firm 2:

b) Using the profit functions in part (a), obtain the reactionfunction of Firm 1 to Firm 2.

c) Using the profit functions in part (a), obtain the reactionfunction of Firm 2 to Firm 1.

d) Using the reaction functions from parts (b) and (c), obtainthe profit maximizing output level of Firm 1.

e) Using the result from part (d), obtain the profit maximizingoutput level of Firm 2.

f) Now assume that the firms engage in a sequential quantitycompetition with Firm 1 as the first mover. Construct the profitfunction of Firm 1.

g) Using the profit function from part (f), obtain the profitmaximizing output level of Firm 1.

h) Obtain the profit maximizing output level of Firm 2.

Answer & Explanation Solved by verified expert
3.6 Ratings (540 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Statistics
1.2K views

In posing the question “Do you believe in aliens?”, 54% +5% of the men responded that...

Biology
1.2K views

Please, answer this question Identify the hormones of the anterior and posterior pituitary along with their target...

Accounting
1.2K views

P 16-9 on september 30,2017, Gargiola inc. Issued 4millions of 10 year, 8% convertible bonds for...

Biology
1.2K views

Two different kinds of cloning library are depicted in the left and right diagrams below...

Geometry
1.2K views

Which of the following is true about AB in the figure given A 5 C...

Basic Math
1.2K views

Jamie is helping his aunt make kites to sell at a craft fair Jamie s...

Basic Math
1.2K views

A wooden artifact from an ancient tomb contains 55 percent of the carbon-14 that is...

Accounting
1.2K views

Data table The records of True Color Engraving reveal the following

Accounting
1.2K views

Section 3 3.1-DIMAG Ltd, an unquoted trading company, which prepares accounts to 31...

Accounting
1.2K views

Assume the following information: Amount Per Unit Sales $ 300,000 $ 40 Variable expenses...

Accounting
1.2K views

Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year,...

Accounting
1.2K views

Scot and Vidia, married taxpayers, earn $69,500 in taxable income and $5,000 in interest from...