Unformatted text preview: plus) higher in industry A or B ? 3.) Untel and Cyrox are two ﬁrms who produce computer chips. Market demand is given by P = 120-20 Q , where Q is total quantity. Both ﬁrms have constant marginal costs. However, Untel can produce more cheaply than Cyrox. Marginal cost at Untel is 20, while at Cyrox it is 40. a) Derive the Cournot equilibrium formally. Graph the equilibrium and explain. b) The ﬁrms secretly agree to form a cartel. They jointly determine their output levels, and share total proﬁts equally. How much will each ﬁrm produce? What will be the proﬁt earned by each (as part of their cartel agreement, they can make payments to each other)? Explain! 1...
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- Fall '08
- Economics, constant marginal costs, Cyrox, similar inverse demand