Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5. Tom is a monopolist input supplier to Dick and Harry. Tom's marginal cost is 1. Dick and Harry are duopolists with production function q

image text in transcribed
5. Tom is a monopolist input supplier to Dick and Harry. Tom's marginal cost is 1. Dick and Harry are duopolists with production function q = x1/2. No firm has fixed costs. The demand for the final product is given by Q = 100 - p. a) Assume Dick and Harry buy the input from Tom at price k. What are their cost functions? b) Find the Cournot equilibrium quantities. c) What price, k, should Tom set? d) Now suppose Dick could buy Tom's firm and stop supplies of the input to Harry so that Dick would be a monopolist. How much is Dick willing to pay for Tom's firm? e) How much is Tom willing to sell his firm for

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Modern Principles of Economics

Authors: Tyler Cowen, Alex Tabarrok

3rd edition

1429278390, 978-1429278416, 1429278412, 978-1429278393

Students also viewed these Economics questions