Question
2. Eric and Rao are the only sellers of hoverboard in the town. Consumer cannot distinguish the hoverboard produced by these producers. The inverse demand
2. Eric and Rao are the only sellers of hoverboard in the town. Consumer cannot distinguish the hoverboard produced by these producers. The inverse demand for hoverboard is given by P = 100 - 0.5Q, where Q = the total quantity offered for sale in the market place. Both Eric and Rao can produce hoverboard at a constant marginal and average total cost of RM20. a) Find the Bertrand outcome. b) Now assume Eric and Rao decide on quantity rather than price, what will be the outcome (quantity, price, and profit) of the two producers? c) Suppose Eric can observe Rao's output before he make his mind on the number of hoverboard that he will produce, what will be the market outcome? d) How much output each should produce if they decide to collude? How much profit each will make? Will this outcome be sustainable?
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