{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

practice_problem2_answers

practice_problem2_answers - AEM 2600 Practice Problem 2 1...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
AEM 2600 Practice Problem 2 1.) You are given the following market demand curve and total cost functions of two companies: , where a) Given that the two firms compete for market share through deciding on their production quantities, please estimate the reaction function for each firm in regards to the other firm’s quantity. Both firms move simultaneously in this scenario (simultaneous game) (2 Points). ( ) ( ) Similarly: b) Calculate the profit maximizing quantities for each firm (2 Points). ( ) ( ) 2.8 c) Calculate the profits of each firm (2 Points). P = 80-4(2.8+6.1) = 44.4
Image of page 1

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

View Full Document Right Arrow Icon
d) Now assume that firm 1 operated as a monopoly in this same market. That is, assume the same demand curve and cost structure for firm one, but firm two is not in the market. What are the profits for firm 1 in this new scenario (2 Points)? ( ) ( ) ( ) = 160 e) Compare this monopoly profit to the profit firm 1 earned when firm 2 was present in the market. Give a brief explanation for the difference between the two numbers (1 Point).
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern