Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rocky's and Bullwinkle's are the only fish bait shops in Moosehead, ME. The daily inverse market demand curve for fish bait in Moosehead is =

Rocky's and Bullwinkle's are the only fish bait shops in Moosehead, ME. The daily inverse market demand curve for fish bait in Moosehead is = 7 0.1(1 + 2). The marginal cost of supplying a unit of fish bait is $1 for both shops. a. Find the equilibrium price of a unit of fish bait and the number of units sold per day by each shop if they compete as Cournot duopolists. Also, compute daily consumer surplus and daily profit on fish bait for each shop. b. Suppose that the two bait shops act as a profit-maximizing fish bait cartel. Find the equilibrium price of a unit of fish bait and the number of units sold per day by the cartel. Compute daily consumer surplus. Also, compute each shop's daily output and profit if each shop supplies half of the total quantity of fish bait supplied by the cartel. c. Write down the payoff matrix facing the two bait shops if each decides between just two possible quantity choices: (i) supply exactly half of the profit-maximizing total quantity of the cartel or (ii) supply the profit-maximizing Cournot quantity. d. Find the Nash equilibrium of one round of play of

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Principles Of Macroeconomics

Authors: N Gregory Mankiw

7th Edition

1285165918, 9781285165912

More Books

Students also viewed these Economics questions

Question

Why is manufacturing overhead allocated to products?

Answered: 1 week ago

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago

Question

7. How can the models we use have a detrimental effect on others?

Answered: 1 week ago