321_20 - Cournot Duopoly 2 firms compete by choosing output...

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ECON 321 Spring 2011: Lecture 20 Finish Monopoly and start Chapter 27: Oligopoly
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Group Problem A Monopolist faces the demand curve: There are $1,000 in fixed costs and each unit costs an additional $4. What is the Profit Maximizing Quantity of Output to sell and what Price should the Monopolist charge? Plot the outcome and calculate the deadweight loss. p p D 100 000 , 2 ) ( - =
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Group Problem Inverse Demand: p = 100 – y MC = 0. Find Monopolist’s optimum, graph and calculate the DWL. Now, suppose demand falls so that the new inverse demand is: p = 75-y/2
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Definitions for Chapter 27 Oligopoly – an industry with a few firms (more than 2, less than a lot) Duopoly – an industry with 2 firms Stackelberg Duopoly – 1 firm chooses output first and the 2 nd follows.
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Unformatted text preview: Cournot Duopoly 2 firms compete by choosing output simultaneously Bertrand Duopoly 2 firms compete by choosing price simultaneously Reaction Function a firm or individuals optimal choice as a function of the choice(s) of others. Group Problem S and C are identical cournot competitors with constant marginal costs of $0.50 per unit and facing inverse demand: Derive equilibrium output and price. 600 , 1 ) ( 2 ) , ( S C S C y y y y p +-= Group Problem Producer 1 follows Producer 2 in Stackelberg competition. Both Marginal Costs are $400 per unit. The market inverse demand is: Derive the equilibrium output for each producer and the market price. ) ( 2 000 , 2 ) , ( 2 1 2 1 y y y y p +-=...
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321_20 - Cournot Duopoly 2 firms compete by choosing output...

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