fix the problems according to the comments in pdf

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Question Description

fix the problems according to the comments in pdffix the problems according to the comments in pdffix the problems according to the comments in pdffix the problems according to the comments in pdffix the problems according to the comments in pdffix the problems according to the comments in pdffix the problems according to the comments in pdf

Tutor Answer

joantutor
School: Carnegie Mellon University

Attached.

Problem 6-1

Use a cell reference or a single formula where appropriate in order to receive full cre
type values, as you will not receive full credit for your answers.

The inverse market demand curve for a duopoly market is p = 14 - Q = 14 - q 1 - q 2, wher
are the outputs of Firms 1 and 2 respectively. Each firm has a constant marginal cost of 2 a
Nash-Cournot best-response curve for Firm 1 is q 1 = 6 - q 2/2.
p
q1
MC
FC

=
=
=
=

14
6
2
4

-

Q

=
q2/ 2

a) Calculate the profit-maximizing output for Firm 1 (best response, BR 1), the profit
price for q 2 = 0, 2, ..., 12.
q2
0
2
4
6
8
10
12

BR1

Q
6
5
4
3
2
1
0

p
6
7
8
9
10
11
12

$8
$7
$6
$5
$4
$3
$2

Profit1
$32
$21
$12
$5
$0
-$3
-$4

Use the scatterplot option in Excel to draw the best-response curve for Firm 1.

Best Response of firm 1
7

Output of firm 1, q1

6
5
4
3
2
1
0
0

2

4

6

8

10

12

Output of firm 2, q2

b) What is the monopoly output and profit for Firm 1? (That is, how much does Firm
produce?) If Firm 1 expects Firm 2 to produce 10 units of output, would it operate
incurring its fixed costs by shutting down)? Will it operate in the short run (when

The monopoly output for Firm 1 is
5 unit(s) and the monopoly pr
If Firm 2 produces 10 units of output, Firm 1 will produce

n order to receive full credit. Do not copy and paste values or
ers.

14 - Q = 14 - q 1 - q 2, where Q is the market output, and q 1 and q 2
onstant marginal cost of 2 and a fixed cost of 4. Consequently, the
14

-

q1

-

q2

t response, BR 1), the profit for Firm 1, the market output, and the

sponse curve for Firm 1.

12

14

hat is, how much does Firm 1 produce if Firm 2 does not
s of output, would it operate in the long run (given that it can avoid
erate in the short run (when its fixed cost cannot be avoided)?

unit(s) and the monopoly profit is
$21 .
in the short run and will shut down in the long run.

Project Description:

In this problem, you will calculate the profits of one of the firms in a duopoly market and determine
should produce or shut down in the short run and in the long run.
Steps to Perform:
Step
1

2
3
4
5

6

7
8

9
10

Project Description:

In this problem, you will calculate the profits of one of the firms in a duopoly market and determine whether
should produce or shut down in the short run and in the long run.

Steps to Perform:
Instructions
Use a cell reference or a single formula where appropriate in order to receive full credit.
Do not copy and paste values or type values, as you will not receive full credit for your
answers.
Start
In cellExcel.
D13, by using relative and absolute cell references, calculate the output for Firm 1
if the output of Firm 2 is in cell C13. Copy the formula from cell D13 down the column
to cell D19.
In
E13, by using cell references, calculate the total output if the output of Firm 2 is in
cell C13 and the output of Firm 1 is in cell D13. Copy the formula from cell E13 down
thecell
column
E19.
In
F13, to
bycell
using
relative and absolute...

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