Question
1.Suppose the airline industry consisted of only two firms: American and Texas Air Corp.Let the demand curve for the industry be P = 100 -
1.Suppose the airline industry consisted of only two firms: American and Texas Air Corp.Let the demand curve for the industry be P = 100 - Q.
a. Suppose that American has lower costs, so that MCA = 25 and MCT = 40.Calculate the Cournot equilibrium quantities and profits for each firm.
b. Graph the best response curves and indicate the equilibrium quantities.
c. Calculate the Stackelberg equilibrium quantities (and profits) when MCA = 25 and MCT = 40 where American is the lead firm.Indicate the equilibrium quantities on the best response graph.
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Advanced Placement Microeconomics
Authors: Bill Hurd
1st Edition
1531150306, 978-1531150303
