Consider an oligopolistic market with two firms who produce an identical produce. One of the...
Question:
Consider an oligopolistic market with two firms who produce an identical produce. One of the firms has a (constant) marginal cost of production of {eq}\$10 {/eq} unit while the other has a (constant) marginal cost of production of {eq}\$20 {/eq}. The demand curve for the market is given by {eq}P = 100 - Q {/eq}, where {eq}Q {/eq} is total output.
a) If this market is run as a Bertrand equilibrium, what price will each firm choose?
b) If this market is run as a Cartel, what price will be chosen? How will production be divided between the two firms?
c) Is this cartel likely to be stable in the absence of a binding agreement? Repeat (a), (b), and (c) for the following demand curve:
{eq}P = 30 - Q {/eq}.
Explain any differences in your original answers.
Oligopoly Market
An oligopoly market is a form of market in which a few firms compete for a larger market share or may collide and jointly capture the market and earn profit.
Answer and Explanation: 1
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View this answera) If the market is run as a Bertrand equilibrium, the price that each firm will choose will be equal to their marginal cost just like in the case of...
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Oligopoly Competition: Definition & Examples
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Chapter 4 / Lesson 16
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Learn what an oligopoly is and its market effects, and view examples of oligopolies. Understand non-price competition and how oligopolies affect price competition.
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