Question
Suppose that two airlines, DirectJet and MyJet, with identical cost functions are serving a regional airport with following information: Market Demand: P = 1000 10Q
Suppose that two airlines, DirectJet and MyJet, with identical cost functions are serving a regional airport with following information:
Market Demand: P = 1000 10Q
Cost functions: AC = MC = $50
aCalculate the equilibrium output and price for each airline, assuming that the each airline choose the output level that maximizes profits taking its rival's output as given.
bCalculate the profit level for each airline at equilibrium level.
cSuppose that DirectJet's costs increased to AC = MC = 100 and MyJet costs remained at the same level. Work out the equilibrium quantity, and price for each airline.
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