h11 - The Colorado College Department of Economics and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 11. 1. The pricing game between two firms, which can set either low or a high price, is given by the following normal form: (a) Find the Nash equilibrium or equilibria of the game. (2 points) (b) How would you label the actions to make it a quantity game like Cournot? (2 points) (c) Suppose demand for a commodity is given by Q = 10,000 – 1000P And marginal cost is constant at MC = 6. Derive the marginal revenue curve. Calculate the price and quantity associated with perfect cartel outcome. Compute industry profit, consumer surplus and deadweight loss. (6 points) 2. Consider a Cournot model where the market demand is given by Q = 120 – P with Q= q A +q B where q A, q B are the quantities produced by firm A and B, respectively. Suppose that marginal and average costs are constant at MC = AC = 30. Calculate the Nash equilibrium quantities for each firm, price and profits for each firm as well as total industry profits. (4+4 = 8 points)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 04/19/2008 for the course EC 207 taught by Professor Ghosh during the Spring '08 term at Colorado College.

Page1 / 2

h11 - The Colorado College Department of Economics and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online