Question
The demand in the market for standard mountain bikes is given by QD = 8002P. We consider 3 modes of competition: Case 1: Assume that
The demand in the market for standard mountain bikes is given by QD = 8002P. We consider 3 modes of competition:
Case 1: Assume that the mountain bike industry is perfectly competitive. The representative firm has a long-run cost function given by C(q) = 0.2q 3 8q 2 +120q.
Case 2: Suppose now that the company S has a monopoly in mountain bike production. Assume that its marginal cost is constant and equal to $40. Case 3: The market for mountain bikes is made up of two identical firms that engage in quantity completion. Each firm chooses its output (q1 for firm 1 and q2 for firm 2). Each firm's marginal cost is constant and equal to $40.
Final equilibrium output level/levels and the price that will prevail in equilibrium in 3 Cases. Explain and compare these three cases in equilibrium
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