ECON 3411 : Chapter 9 Solution.pdf
Document Summary
Solving yields q = 135 units: p = mc = , each firm earns zero economic profits, oil production. Each firm produces output independently and the market price is determined by the total amount produced: diamond production. Debeers is the leader that sets diamond production, and smaller firms follow with their own levels of production: competitive bidding by identical contractors. In this case, the contractor bidding the lowest fee will win the contract. Industry profits = ,500: firm 1"s output and profit would increase. Firm 2"s output and profits would decrease: for small changes in costs, there would be no change in output or profits, cournot duopoly, bertrand duopoly, stackelberg duopoly, sweezy duopoly. The equilibrium price will equal marginal cost, so p = 4. This would positively impact sales and the firm"s bottom line if ford is the only company to offer such a program. However, one would expect rivals (such as gm) to respond with a similar plan.