12. Suppose that in a particular market, the inverse demanded for hasenpfeffer is given by P =...
Question:
12. Suppose that in a particular market, the inverse demanded for hasenpfeffer is given by P =
100 – Q. The market is served by two Cournot competitors, Hansel and Gretel, whose quantities are denoted q H and q G , respectively. Both competitors can produce hasenpfeffer at a constant marginal and average total cost of $10.
a. Find the Cournot equilibrium output and price.
b. Suppose that demand doubles so that at each price, twice as many servings are demanded as before. Specifically, P = 100 – 0.5Q. What happens to the Cournot price and quantity as a result of the increase in demand?
c. Suppose that the original demand doubles, but in a different way, so that each customer is willing to pay twice as much as before to obtain hasenpfeffer. Specifically, P = 200 – 2Q.
What happens to the Cournot price and quantity as a result of the increase in demand?
d. Would your answers to
(b) and
(c) remain the same if Hansel and Gretel were Bertrand competitors rather than Cournot competitors?
Step by Step Answer:
Microeconomics
ISBN: 9780716759751
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson