Consider the following duopolistic competition with identical products. Market Demand:P = 15 - Q Costs:MC A =2;
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Question:
Consider the following duopolistic competition with identical products.
Market Demand:P = 15 - Q
Costs:MCA =2; and MCB = 3. (i.e., the two firms have constant MC).
Firm A chooses its quantity qA first.After observing Firm A's quantity choice, Firm B chooses its quantity qB.
1)Please calculate, step by step, the optimal qA and qB.
2)What are the corresponding profits for the two firms?Please show your work.
Next, assume that the two firms compete in prices.
3)what is the optimal price for Firm A?What happens to Firm B in this case?
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