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Minchanka [31]
3 years ago
6

Two firms compete in a market to sell a homogeneous product with inverse demand function P = 600 – 3Q. Each firm produces at a c

onstant marginal cost of $300 and has no fixed costs. Use this information to compare the output levels and profits in settings characterized by Cournot, Stackelberg, Bertrand, and collusive behavior.
Business
1 answer:
podryga [215]3 years ago
3 0

Answer:

Explanation:

We need to find the function of firm 1 and firm 2 which we have as

PQ1/Q1= 300

600Q1– 3Q21 – 3Q1Q2/ = 300

300 – 6Q1 – 3Q2= 300

Q1 = 1/6(600 -300 – 3Q2)

Q1 = 50 – 1/2Q2 Reaction function for firm 1

Q2 = 50 – 1/2Q1 Reaction function for firm 2

Cournot which we have as;

Q2 = = 1/6(600 -300 – 3Q1)

Q2 = 50 – 1/2Q1

Q2 = 50 – ½(50 – 1/2Q1)

Q2 = 50 – 25 + 1/4Q1

Q1 = 100/3 = 33.33 Output

Q2= 100/3 = 33.33 Output

Equilibrium market price which is

P = 600 – 3(Q2+ Q2)600 – 3(100/3 + 100/3)= 400

Profits for firm 1

Π1 = TR1– C1= PQ1 – C1=400 * 100/3 – 300 * 100/3= 10000/3 = $3,333.33 For firm 1

Profits for firm 2

Π2 = TR2– C2= PQ2 – C2=400 * 100/3 – 300 * 100/3= 10000/3 = $3,333.33 For firm 2

Stackelberg is given as ;

QL= (600 – 300)/2*3 = 50 Firm 1 output is QL = 50

QF= (600 – 300)/4*3 = 25 Firm 2 output is QF =25 P = 600 – 3*75 = 375

Π1 = (375-300) * 50 = 3750Profit for firm 1

Π2 = 75*25 = 1875 Profit for firm 2

Bertrand is given as ;

Under this competition, price is the same to marginal cost and profits are zero

600 – 3Q = 300

Q = 100 Output = 100

P = Zero

Collusive Behavior is given as;

MR=MC600 - 6Q = 300

300 = 6QQ = 50 Output

P = 600 – 3*50 = 450

Π = (450 – 300) * 50 = 7,500profit

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Answer:

The correct answer is "$19,125,045".

Explanation:

According to the question,

Number of shares,

= 850,000

Per share,

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The shares needed will be:

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hence,

The total cost will be:

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6 0
3 years ago
Calvin loves eating at mcdonald's claiming they have the best fries, but when it comes to dessert, he feels he's a cake connoiss
liq [111]

Answer: Cross Shopping

Explanation: Cross shopping is a technique there a single consumer plays around different suppliers to get the goods of his/her liking. It involves having conflicting needs and purchasing premium and budget products. In this case,Calvin loves eating at mcdonald's claiming they have the best fries, but for dessert he likes to eat cakes only at kaminsky's. Since, Calvin is shopping from different suppliers to get the products of his liking his behavior will be called cross shopping.

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3 years ago
Which of the following characteristics differentiates a firm in an oligopolistic market from a firm in a perfectly competitive m
Oliga [24]

Answer:

A) A firm in an oligopolistic market has to consider its own impact on price when making production decisions

Explanation:

A perfectly competitive market is a market with many firms selling identical product. There are free entry and free exist and the decision of a firm does not affect the price in the market as all firms are price takers. Therefore, each firm is independent under perfectly competitive market and production decisions of a firm in a perfectly competitive market does not affect the price in the market nor will it cause any reaction from other firms.

However, Oligopolistic market is a market where there are few firms which are 3 or more firms but not more than 20 firms selling identical or differentiated product.. Firms in oligopolistic market are interdependent which implies that the decision of one firm can affect price and this can cause reaction from other firms and then lead to a price war. A price war occurs when each firm continually reduces its own price in order to increase its market share which causes other firms to react reducing their own prices and this will make none of the firms to gain in the end. In order to avoid the price war, each firm in an oligopolistic market has to consider its own impact on price when making production decisions.

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2 years ago
You are a real estate owner in Bloomington Indiana and you have rented a house to students. You expect to make 6% per year on th
Lyrx [107]

Answer:

The present value of the contract is 0.5% higher if the rent is paid at the beginning of the month. That is equal to $11.28 for every $100 of rent.

Explanation:

if the rent is paid at the beginning of the month, the present value of the lease contract will be:

PV = monthly rent x PV annuity due factor

we are not given the monthly rent, but we know the PV annuity due factor for 0.5% and 24 periods = 22.67568

if the rent is paid at the end of the month, the PV = monthly rent x PV ordinary annuity factor

the PV ordinary annuity factor, 0.5%, 24 periods = 22.56287

assuming that the rent is $100 (just to calculate a %), the PV of an annuity due = $2,267.57

the PV of an ordinary annuity = $2,256.29

the difference between them = [($2,267.57 / $2,256.29) - 1] x 100 = 0.5%

7 0
3 years ago
The Clemson Company reported the following results last year for the manufacture and sale of one of its products known as a Tam.
serious [3.7K]

Answer:

See below

Explanation:

According to the information above, there would be no sales if TAM is discontinued as there would be no cost traced to it safe for $145,000 for fixed manufacturing overhead.

We already know that the net operating loss was $55,000 the fixed manufacturing overhead of $145,000 would further increase the loss by $90,000

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