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3 Feb 2019
Market Demand is p = 25 - 0.002Q. Firms have a constant marginal cost of c = 5 per unit produced with no fixed costs.
a. Suppose the government pays F to have a second firm enter the market to compete with the incumbent firm under Cournot competition.
i. what price will be charged? how much profit will each firm receive?
ii. how much surplus will consumers receive?
b. Ignore part a, suppose the government pays F to have second firm enter the market to compete with the incumbent firm under Bertrand competition
i. what price will be charged? how much profit will each firm receive?
ii. how much surplus will consumers receive?
Market Demand is p = 25 - 0.002Q. Firms have a constant marginal cost of c = 5 per unit produced with no fixed costs.
a. Suppose the government pays F to have a second firm enter the market to compete with the incumbent firm under Cournot competition.
i. what price will be charged? how much profit will each firm receive?
ii. how much surplus will consumers receive?
b. Ignore part a, suppose the government pays F to have second firm enter the market to compete with the incumbent firm under Bertrand competition
i. what price will be charged? how much profit will each firm receive?
ii. how much surplus will consumers receive?
Patrina SchowalterLv2
4 Feb 2019