05 Jun 13. Samsung (firm 1) and Micron (firm 2) produce
Question
13. Samsung (firm 1) and Micron (firm 2) produce DRAM chips (identical products) and are forced to charge the same price. Suppose market demand is given by
P = 100 – Q, where Q = Q1 + Q2
and suppose that Samsung and Micron have the following TC functions:
Samsung: TC1 = 10Q1 and
Micron: TC2 = 10Q2
(a) Determine the Cournot equilibrium quantities, equilibrium price, and profits for each firm.
(b) Suppose Samsung’s cost increases to TC1 = 12Q1 while Micron’s cost remains the same. What is the effect on the equilibrium outputs of each firm? What happens to equilibrium price and to profits of each firm?
(c) Assume the same cost structure for the two firms as given in question (a). If firm 1 is the leader and firm 2 is the follower, what would be the price, quantity and profit outcomes?
(d) What would the price, quantity and profit outcomes be if the firms competed as Bertrand oligopolists?
(e) What would the price, quantity and profit outcomes be if the firms colluded?
(a) P = 100 – (Q1 + Q2) = 100 – Q1 – Q2
TC1 = 10Q1 and TC2 = 10Q2. This implies that MC1 = 10 and MC2 = 10
Here the two firms engage in Cournot type competition
Firm 1
MR1 = 100 –Q2 – 2Q1
MR1 = MC1 implies that
100 –Q2 – 2Q1 = 10
2Q1 = 90 – Q2
Q1 = 45 – 0.5Q2. This is the reaction function (best response function) of Firm 1
Similarly, we can set MR2 = MC2 and find that
MR2 = 100 –Q1 – 2Q2
100 –Q1 – 2Q2 = 10
2Q2 = 90 – Q1
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.