Question
Two firms A and B produce goods A and B, respectively. The linear demands for the two goods are, respectively, Production costs are constant but
Two firms A and B produce goods A and B, respectively. The linear demands for the two goods are, respectively,
Production costs are constant but not equal:
- Using calculus, derive the equations for best response curves.
- Sketch a graph of the two best-response curves. Label both axes and response curves.
- If firm A expects firm B to set its prices at $20, what is firm A's best response? If firm B predicts firm A will price good A at $36, what is firm B's best response?
- What is the Nash equilibrium price and quantity for each firm?
- How much profit does each firm earn in Nash equilibrium?
- If firm A and firm B set prices of $22 and $35 respectively, how much profit does each firm earn? Why don't they choose these prices then?
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Horngrens Accounting
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann L. Johnston, Peter R. Norwood
10th Canadian edition Volume 2
978-0133855388
