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Using same two firms and market demand curve from above, now assume that firm 1 can move
first (i.e. they can choose their quantity produced before firm 2) and has full information about
firm 2’s cost structure. a) In this new scenario, how much do firm 1 and firm 2 produce? (3 points)
( ( )) b) What are the new profits of each firm and how do they compare to the profits you found in
problem #1? (2 points) How do the total profits (sum of firm 1 and 2) compare? (1 point)
( ) The profit for firm 1 increases (or increases by 337.5) The profit for firm 2 decreases (or reduces by 731.25) The total profits decrease (by 393.75). =3037.5...
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This document was uploaded on 01/25/2014.
- Fall '14