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Suppose there are two firms in a market who each simultaneously choose a quantity. Firms 1s quantity is q1 and firms 2s is q2. Therefore the market quantity is Q=q1+q2. The market demand curve is given by P=100-4Q. Also, each firm has constant marginal cost = 28. There are no fixed costs.

MR1=100-8q1-4q2
MR2=100-4q1-8q2

I found the output of each firm to be 6 for each and the market price to be 52

a.) What is the deadweight loss that results from this duopoly?
b.) How much profit does each firm make?
c.) Suppose firm 2 produced 2 units of output, how much output should firm 1 produce in order to max profit?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9494143

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