{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PS9 updated

# PS9 updated - Rice Un iv e rsity E C O N 211 Fall 2007...

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

1 Rice University E C O N 211, Fall 2007 Problem Set 9 D u e on T uesday/Wednesday, November 20 /21 1. (40 pts.) Suppose that, in the chocolate candy industry, there are only two firms: Hershey and M&M. Each producer produces identical candy bars and has a constant marginal cost (MC), \$20. The demand for candy bars is represented by 200 P Q , where P is the price and Q is the industry output level. a) If these firms form a cartel and act as a monopolist in the market, their joint marginal revenue will be 200 2 MR Q . What is their combined price and the joint profits? b) Now suppose each firm chooses the profit maximizing output level assuming that its opponent will continue to produce the current level of output (Cournot Oligopoly). The optimal choice of output level ( h q ) by Hershey when M&M is currently producing m q units of candy bar is given by 90 2 m h q q . Similarly it is 90 2 h m q q for M&M. Solve for the price, the equilibrium output levels of each firm, and their profits.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern