Question

II. Consider a market for refrigerators with two firms. Firm 1 has a linear cost function $C(q_1) = 19q_1$, and firm 2's cost function is $C(q_2) = \frac{1}{2}q_2^2$. The market inverse demand function is $P(Q) = 100 - 0.5Q$, where $Q$ is the total quantity produced. 1. If firms compete à la Cournot, what is the Cournot-Nash equilibrium optimal price and quantity of refrigerators produced? 2. Suppose the two firms decided to form a Cartel, determine the optimal price and quantity of refrigerators produced. 3. Compare total profits in Cournot and in Cartel, with intuitive explanation.

          II.
Consider a market for refrigerators with two firms. Firm 1 has a linear cost function
$C(q_1) = 19q_1$, and firm 2's cost function is $C(q_2) = \frac{1}{2}q_2^2$. The market inverse demand
function is $P(Q) = 100 - 0.5Q$, where $Q$ is the total quantity produced.

1. If firms compete à la Cournot, what is the Cournot-Nash equilibrium optimal price and
quantity of refrigerators produced?

2. Suppose the two firms decided to form a Cartel, determine the optimal price and quantity
of refrigerators produced.

3. Compare total profits in Cournot and in Cartel, with intuitive explanation.

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II.
Consider a market for refrigerators with two firms. Firm 1 has a linear cost function
C(q1) = 19q1, and firm 2's cost function is C(q2) = (1)/(2)q2^2. The market inverse demand
function is P(Q) = 100 - 0.5Q, where Q is the total quantity produced.

1. If firms compete à la Cournot, what is the Cournot-Nash equilibrium optimal price and
quantity of refrigerators produced?

2. Suppose the two firms decided to form a Cartel, determine the optimal price and quantity
of refrigerators produced.

3. Compare total profits in Cournot and in Cartel, with intuitive explanation.

Added by Gregg P.

Principles of Economics

Gregory Mankiw 8th Edition

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Solved by Expert Akash M

Step 1

Cournot-Nash Equilibrium: In a Cournot competition, each firm chooses its quantity of production taking into account the quantity produced by the other firm. To find the Cournot-Nash equilibrium, we need to determine the quantity produced by each firm. First, we Show more…

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Can you please answer the 3 questions? I would really appreciate it. 11. Consider a market for refrigerators with two firms. Firm 1 has a linear cost function C(q1) = 19q1, and firm 2's cost function is C(q2) = âˆš2q2. The market inverse demand function is P(Q) = 100 - 0.5Q, where Q is the total quantity produced. 1. If firms compete Ã la Cournot, what is the Cournot-Nash equilibrium optimal price and quantity of refrigerators produced? 2. Suppose the two firms decided to form a Cartel, determine the optimal price and quantity of refrigerators produced. 3. Compare total profits in Cournot and in Cartel, with an intuitive explanation.

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