Q: This exercise is a continuation of Exercise 3. We return to
This exercise is a continuation of Exercise 3. We return to two firms with the same constant average and marginal cost, AC = MC = 5, facing the market demand curve Q1 + Q2 = 53 – P. Now we will use th...
See AnswerQ: Two firms compete in selling identical widgets. They choose their output
Two firms compete in selling identical widgets. They choose their output levels Q1 and Q2 simultaneously and face the demand curve P = 30 – Q where Q = Q1 + Q2. Until recently, both firms had zero ma...
See AnswerQ: In the Stackelberg model, the firm that sets output first has
In the Stackelberg model, the firm that sets output first has an advantage. Explain why.
See AnswerQ: What do the Cournot and Bertrand models have in common? What
What do the Cournot and Bertrand models have in common? What is different about the two models?
See AnswerQ: Explain the meaning of a Nash equilibrium when firms are competing with
Explain the meaning of a Nash equilibrium when firms are competing with respect to price. Why is the equilibrium stable? Why don’t the firms raise prices to the level that maximizes joint profits?
See AnswerQ: The kinked demand curve describes price rigidity. Explain how the model
The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?
See AnswerQ: A monopolist is deciding how to allocate output between two geographically separated
A monopolist is deciding how to allocate output between two geographically separated markets (East Coast and Midwest). Demand and marginal revenue for the two markets are: P 1 = 15 – Q1 MR 1 =...
See AnswerQ: Why does price leadership sometimes evolve in oligopolistic markets? Explain how
Why does price leadership sometimes evolve in oligopolistic markets? Explain how the price leader determines a profit-maximizing price.
See AnswerQ: Why has the OPEC oil cartel succeeded in raising prices substantially while
Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization? What organizational problems mu...
See AnswerQ: What are the characteristics of a monopolistically competitive market? What happens
What are the characteristics of a monopolistically competitive market? What happens to the equilibrium price and quantity in such a market if one firm introduces a new, improved product?
See Answer
