Question
You are a producer of semi-trucks. Because it takes a long time to build a semi-truck, you make your output decisions before the demand information
You are a producer of semi-trucks. Because it takes a long time to build a semi-truck, you make your output decisions before the demand information is actually revealed. The best prediction of what the demand for semi-trucks will be next year is a demand curve where:
P = 4000 - 2 Q,
Where P is the market price and Q is the total output in the market from all suppliers.
Answer each of the following questions. Explain your answers and show your work.
- Say you are faced with a Cournot setting where you face a competitor named SEMI. Your marginal cost is still 400 and SEMI's marginal cost is 400 per semi-truck. Describe the conditions of a Cournot setting. What quantity of semi-trucks will you produce? What quantity will SEMI produce? What will be the market price of semi-trucks? How much will each of you earn in profits? (5 points)
Describe Conditions of Cournot setting.
Your production of semi-trucks _______________
SEMI's quantity of semi-trucks ________________
Market Price of semi-trucks _________________
Your Profit _______________
SEMI's Profit _______________
Space for Calculations:
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