ECON 2 Lecture Notes - Lecture 17: Demand Curve, Deflation, Oligopoly

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rosebuffalo981

13 Aug 2020

School

Irvine Valley College

Department

Economics

Course

ECON 2

Professor

colins

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Document Summary

There are two independent firms producing and selling homogenous products. Each firm knows the demand curve for the product. The cost of production is assumed to be zero. Each firm decides about the quantity it is going to produce and sell in each period. Each firm is uncertain of other firms plan regarding the quality to be produced. Each firm takes supply of the rival firm to be constant. The demand curve is assumed to be a straight line downward sloping. Here, there are two firms; the model is based on the following assumptions: When firm b enters the market, it finds when half of the market has been taken. When will be the best position for firm b?. Firm b is therefore facing c1q demand curve. Firms b enters the market and supply half of c1q demand curve, i. e. , the remaining market which is a of the total market.

Related Questions

Suppose that inverse demand is given by p(Q) = a-bQ, where Q is total quantity supplied in the market. There are two firms in the market, each with a cost function of c(q) = cq, now assume that the first firm moves before the second firm.

A) Compare the price level and level of output under Stackelberg to Cournot

B) What is the fundamental reason that the first firm in the stackelberg model is able to earn higher profits than in the Cournot model

salmonsea-lion270

Suppose that each firm in a competitive industry has the following costs:

Total Cost: TC=50+1/2 q2

Marginal Cost: MC=q

where q is an individual firm's quantity produced.

The market demand curve for this product is:

Demand QD=140-2P

where P is the price and Q is the total quantity of the good.

Each firm's fixed cost is $__________

What is each firm's variable cost?

_______ 50+1/2q

_______1/2q

_______q

_______1/2q2

Which of the following represents the equation for each firm's average total cost?

_____ 50/q

_______ 50/q+1/2q

_______1/2q

_______50+1/2q

Complete the following table by computing the marginal cost and average total cost for from 5 to 15.

5
6
7
8
9
10
11
12
13
14
15

The average total cost is at its minimum when the quantity each firm produces (q) iquals ________

Which of the following represents the equation for each firm's supply curve in the short run?

_______1/2q2

______q

_____50-q

_____120-1/2q2

In the long run, the firm will remain in the market and produce if________

Currently, there are 8 firms in the market.

In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is

________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)

In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)

Firms have an incentive to EXIT/ENTER the market.

In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________

firms in the market, with each firm producing _________units.

orchidbadger835

16 points) Consider a homogenous good market with the following market demand curve: Q=100-p

Two firms produce output at a constant marginal cost = 10. Derive the Nash equilibrium outcome in terms of prices, outputs, and the profits of the two firms under the following alternative situations in a)-d)

a) (3 points) Firms engage in Bertrand price competition with no capacity constraints.

b) (3 points) Firms engage in Bertrand price competition and each firm has a maximum production capacity = 15.

c) (2 points) How would your answer in part (b) change if the capacity of each firm is 90?

d) (5 points) Firms engage in Cournot quantity competition (i.e., determine their capacity assuming that the price is such that market demand equals industry capacity).

e) (3 points) Compare the industry output in cases (a) and (d) to the socially optimal and the monopoly output levels.

ultramarinewoodchuck453

ECON 2 Lecture Notes - Lecture 17: Demand Curve, Deflation, Oligopoly

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