Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

Economics


Home >> Microeconomics

Two firms produce differentiated products. Firm 1 faces the demand curve Q1 = 75 - P1 + .5P2. (Note that a lower competing price robs the firm of some, but not all, sales. Thus, price competition is not as extreme as in the Bertrand model.) Firm 2 faces the analogous demand curve Q2 = 75 - P2 + .5P1. For each firm, AC = MC = 30.

a. Confirm that firm 1's optimal price depends on P2 according to P1 = 52.5 + .25P2. (Hint: Set up the profit expression Ti1 = (P1 - 30)

Q1 = (P1 - 30)(75 - P1 + .5P2) and set MTi = hTi1/hP1 = 0 to solve for P1 in terms of P2. Alternatively, set MR1 = MC and solve for Q1:
and then P1 in terms of P2.

b. Explain why a lower price by its competitor should cause the firm to lower its own price.

c. In equilibrium, the firms set identical prices: P1 = P2. Find the firms' equilibrium prices, quantities, and profits.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91549201
  • Price:- $25

Priced at Now at $25, Verified Solution

Have any Question?


Related Questions in Microeconomics

Question the theory of comparative advantage may be applied

Question: The theory of comparative advantage may be applied to a country's output. Although natural resources within a country may often provide the best opportunity for comparative advantage, certain countries are able ...

Question imagine you are a stakeholder for a non-profit

Question: Imagine you are a stakeholder for a non-profit health care organization. As a leader you are responsible for modeling ethical behavior and have the ability to encourage patient safety initiatives. Write a 1,050 ...

Question in spite of the greater emphasis on a planned

Question: In spite of the greater emphasis on a planned economy in France than in Germany, the growth rate in France has averaged more than 1% higher than Germany over the past five years, whereas during the previous fiv ...

Quesiton the firms demand for labor is a derived demanda

Quesiton: The firm's demand for labor is a derived demand. A. Explain the law of diminishing marginal returns and show graphically how it affects labor demand curves. B. Explain and show graphically why the marginal reve ...

Question consider an industry with demand q 120 - 3p and

Question: Consider an industry with demand q = 120 - 3p and supply q = 2p - 10. Suppose that production is polluting the environment and that the marginal social cost of production is given by MSC(q) = 1/2 q^2. (a) What ...

Question please do not send any pictures just text which

Question: Please do not send any pictures, just text which can be copied and modified. Write a short essay of about 750 words on the following topic: How does Mancur Olson explain differences in economic performance of n ...

Question imagine that a 10000 ten-year bond was issued at

Question: Imagine that a $10,000 ten-year bond was issued at an interest rate of 6%. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9%. a. Given the change in ...

Question in the early 1990s mit economist lester thurow

Question: In the early 1990s, MIT economist Lester Thurow wrote that of the three major powers in the world economy in the twenty-first century, Europe would be the leader. However, its growth rate fell far behind the US ...

Quesiton if a corporation has a tax credit of 80000 and its

Quesiton: If a corporation has a tax credit of $80,000 and its taxable income is $550,000. How much tax do they have to pay based on the tax table in your equation sheet? The response must be typed, single spaced, must b ...

Question why do the authors of why ation ail place such

Question: Why do the authors of Why ation ail place such heavy emphasis on institutions as one of the most critical elements for the generation of prosperity among developing countries? What other factors do they also de ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As

Follow Us

© Copyright 2013-14 mywordsolution.com All rights reserved