Monopolistic Competition and Oligopoly

Price: $20 USD

Question description

Firms 1 and 2 produce an identical product and serve the market described by the demand P=100-Q, where Q=Q1+Q2. Firms compete by choosing their output levels. Firm 1’s total cost function is TC(Q1)=100+20*Q1. Firm 2’s total cost function is TC(Q2)=100+10*Q2. The market demand and cost structure are common knowledge, and Firm 2 moves first. a. How many units of output will each of the firms produce in equilibrium? (5 points) b. What is the equilibrium price and equilibrium profit of each firm? (3 points) c. Now assume that firms compete by setting prices rather than quantities and can change their prices in finely divisible (infinitely small) increments. Firm with the lowest price gets all the market, and firms split the market if there is a tie. Find the equilibrium market price(s), and market quantity in this game and explain your result. (3 points) d. What are the individual firms’ output levels and profits in Part c? (2 points) e. Will your answers in all parts above change if the firms were to move simultaneously rather than sequentially? If so, please provide the new prices, quantities, and profits where appropriate. (6 points)

Tutor Answer

(Top Tutor) Daniel C.
School: UCLA
Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1830 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors