Unformatted text preview: b. Derive the longrun total cost curve equation c. What quantity maximizes the f rm’s pro f t? d. Find the optimal input combination that produces the pro f tmaximizing quantity. Illustrate. 5. A duopoly faces a market demand of p = 120 − Q. Firm 1 has a constant marginal cost of MC 1 = 20 . Firm’s 2 constant marginal cost is MC 2 = 40 . Calculate the output of each f rm , market output, and price if there is (a) a collusive equilibrium or (b) a Cournot equilibrium. 6. Suppose that identical duopoly f rms have constant marginal costs of $10 per unit. Firm 1 faces a demand function q 1 = 100 − 2 p 1 + p 2 , where q 1 is Firm’s 1 output, p 1 is Firm’s 1 price and p 2 is Firm’s 2 price. Similarly, the demand for Firm 2 is q 2 = 100 − 2 p 2 + p 1 . Find the Bertrand equilibrium. 1...
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 Fall '08
 Idson
 Economics, Microeconomics, Monopoly, Firm, constant marginal cost, inverse demand curve

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