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An industry has a demand function of "(p) 200 10p. There are only two firms in this industry, and there is no entry or exit. Firm 1 has a constantmarginal cost of $8, and firm 2 has a constant marginal cost of $9. a. (7 points) Find the price, quantities, and profits under Cournot competitionbetween the firms.b. (5 points) Find the price, quantities, and profits if firm 1 is a Stackelberg leader,c. (5 points) Find the price, quantities, and profits if firm 2 is a Stackelberg leader.d. (5 points) Find the price, quantities, and profits under Bertrand competition. e. (5 points) Suppose the two firms were able to collude. What quantity would each firm produce, and what price would be charged to maximize total profits of the cartel?(6 points) Suppose that the firms are facing this demand and cost function each period, and they have discount factor &. Suppose the collusive profits are split equally between the two firms each period. Suppose also that this cartel is supported by a trigger strategy, where both firms revert back to Coumot competition forever if either firm cheats. This cartel is only stable if each firm has a discount factor above what level?g. (5 points) How should the profits be split between the two firms if you wantedmaximize the stability of the cartel? In other words, how should the profits be split to minimize the highest required discount factor of the two firms? h. (7 points) Suppose now that each firm has a constant marginal cost of $10 and a fixed cost of $5, and there is free entry and exit in the industry. If firms in the industry engage in Cournot competition, how many firms will enter the industry in equilibrium? |
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Answer» iiiiii |
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