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A. Two firms, A and B, both have costs C(Qi) = 25C1i. Market demand is Q = 100 - 2P; Q = 0A + QB.
A. Two firms, A and B, both have costs C(Qi) = 25C1i. Market demand is Q = 100 - 2P; Q = 0A + QB. (1) a. If this market were perfectly competitive, what would market price, quantity, and profits be? b. If this market were operating as a cartel, what would market price, quantity, and profits be? (2) Assume the market is operating as a Cournot duopolv. a. What is firm A's profit function? b. What is firm A's reaction function? c. What is firm A's output? What are market output and price? d. What is firm A's profit? (3) Assume the market is a Stackelberg duopolv, and firm A is the leader. a. What is firm A's profit function? b. What is firm A's output? c. What is firm B's output? What are market output and price? d. What is firm A's profit? What is firm B's profit? (4) Assume that A and B have agreed to create a cartel in which each member keeps the profit produced by his/her own output. a. IfA decides to cheat, and A assumes that B will produce the agreedupon level (namely, half the total amount from {1) b.), how much will A produce? b. How much profit does each firm receive ifA cheats and B does not? What is each firm's profit if both firms cheat
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