Homework 7 - ECON 1100: Intermediate Microeconomics...

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ECON 1100: Intermediate Microeconomics Instructor: Sandra Orozco Homework 7 Due date: December 8, 2010 1. (15 points) In the following, let the market demand curve be P = 70 - 2Q, and assume all sellers can produce at a constant marginal cost of c = 10, with zero fixed costs. a) If the market is perfectly competitive, what is the equilibrium price and quantity? b) If the market is controlled by a monopolist, what is the equilibrium price and quantity? How much profit does the monopolist earn? c) Now suppose that Amy and Beau compete as Cournot duopolists. What is the Cournot equilibrium price? What is total market output, and how much profit does each seller earn? 2. (15 points) Let’s consider a market in which two firms compete as quantity setters, and the market demand curve is given by Q = 4000 - 40P. Firm 1 has a constant marginal cost equal to MC1 = 20, while Firm 2 has a constant marginal cost equal to MC2 = 40. a) Find each firm’s reaction function. b) Find the Cournot equilibrium quantities and the Cournot equilibrium price.
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This note was uploaded on 03/10/2012 for the course ECON 1100 taught by Professor Unver during the Fall '06 term at Pittsburgh.

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Homework 7 - ECON 1100: Intermediate Microeconomics...

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