Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

There are only 2 producers of gadgets:Blue Gadgets Inc. (B) produces only blue gadgets; the Green Gadget Company (G) produces only green gadgets.Although the customers

There are only 2 producers of "gadgets":Blue Gadgets Inc. (B) produces only blue gadgets; the Green Gadget Company (G) produces only green gadgets.Although the customers of gadgets care about the price of the gadgets that they buy, they also have preferences as to color: some customers prefer green gadgets; some customers prefer blue gadgets.These preferences are expressed in terms of the demand curves for each company's products (where Q is millions of gadgets per year and P is the price per gadget):

QB = 400 - 40*PB + 40*PG

QG = 400 - 40*PG + 40*PB

The marginal costs for producing gadgets are the same for both companies: MCB = MCG = $10.

If each company competes on the basis of price (and each company assumes that the other company's price is unaffected by the first company's pricing), what will be the equilibrium outcome in terms of the prices, quantities, and profits for the 2 firms.

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

International Economics

Authors: Thomas Pugel

16th Edition

0078021774, 9780078021770

More Books

Students also viewed these Economics questions

Question

What would your predictions be for ad spend by media 2025?

Answered: 1 week ago

Question

What is the difference between needs and wants? (p. 263)

Answered: 1 week ago