Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The inverse demand for tea is given by P = 8- 0.04 Q , where P is the price per a gram of tea and

The inverse demand for tea is given byP= 8- 0.04Q, wherePis the price per a gram of tea andQis the total number of grams of tea brought to market. There are two tea shops in the market. Shop 1's cost function is given byC1=0.01q1^2, whereq1is the number of grams of tea it brings to market. Shop 2's cost function is given byC2=0.01q2^2, whereq2is the number of grams of teait brings to market. Given that the two shops compete by setting output (Cournot), answer the following.

a) Identify shop 1's reaction function to shop 2's output to within 2 decimal places

q1=_____-______q2

b)Identify shop 2's reaction function to shop 1's output to within 2 decimal places

q2=-q1

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_2

Step: 3

blur-text-image_3

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

The Wisdom Of Crowds

Authors: James Surowiecki

1st Edition

0385721706, 9780385721707

More Books

Students also viewed these Economics questions