04 Jun 1. The market demand curve in a commodity chemical ind
Question
1. The market demand curve in a commodity chemical industry is given by Q = 600 -3P, where Q is the
quantity demanded per month and P is the market price in dollars. Following is the cost function
associated with the production.
Firm 1: TC = 100 + 70q
Firm 2: TC = 80 + 80q
a) Find the cournot equilibrium quantities for each firm and market price.
b) Assuming that firm 1 is the Stackelberg leader; find the Stackelberg equilibrium quantities for each
firm and market price.
c) Compare the profit between a) and b). Under which equilibrium is overall industry profit the greatest.
2. SS and LG are duopoly cell phone producers in S. Korea. Both firms are seeking to expand 4GB cell phone
market in Dubai. Managerial team is carefully studying the level of competition and the market demand
for 4 GB cell phone. A study shows that the market demand curve for 4GB cell phone is P = 180 –Q. Also,
they conclude that there are will be no competitors other than SS and LG, if they both enter, in Dubai at
least for a few years. Both firms have similar MC: MCSS=40 and MCLG= 44. What would be the likely
outcome of the entry decision? Which firm would enter? or both? Show your work and game table in
order to support your answer.
3. The Bergen Company and the Gutenberg Company are the only two firms that produce and sell a
particular kind of machinery. The demand curve for their product is P= 580-3Q where P is the price of
the product, and Q is the total amount demanded. The total cost function of the Bergen Company is
TCB = 410QB where TCB is its total cost and QB is its output. The total cost function of the Gutenberg
Company is TCG= 460QG where TCG is its total cost and QG is its output. There are competing for a new
market.
a) Draw pre-game table.
b) If only one firm enters new market, how much will each firm produce and will make the
profit?
c) If both enter the new market, how much will each firm produce and will make the
profit?
d) Complete the game table matrix with the payoffs. What is the Nash EQ?
e) If these two firms collude and they want to maximize their combined profit, how much
will the Bergen Company produce? And Profit?
f) How much will the Gutenberg Company produce?
g) Is this collusion would work? Why or why not?
h) If the Bergen Company moves first, how much profit for each firm will change?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.