Question
Only two firms (1 and 2) compete in a market for instant noodles which are considered to be identical by their consumers.Suppose each firm has
Only two firms (1 and 2) compete in a market for instant noodles which are considered to be identical by their consumers.Suppose each firm has the following cost function.
C(qi)=120qi ; where i =1 and 2
The total market demand for instant noodles is represented by following demand function
P = 600 - Q;where Q = q1 + q2
Answer the following questions:
A. If both firms are maximizing profit and consider that the total output produced by their opponent as given, calculate:
- The number of output produced by each company.
- The price of instant noodle in the market.
- Each company's profit.
- Illustrate the reaction functions of both companies and the equilibrium level of outputs in a graph
B.If both companies independently and simultaneously compete in setting the price of the product, calculate:
- The price of instant noodle set by each firm. Please explain your answer
- Total output produced by both companies.
- The total profit earned by each firm.
- Compare the results with the perfectly competitive market's solution.
C.If 1 and 2 collude, what are the price andthe total number of instant noodles produced in the industry
D.Compare and discuss the prices and numbers of total output produced by the firms in the three different scenarios: perfectly competitive, monopoly and oligopoly markets.
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