Exercise 1:
Suppose two companies (A and B) control the whole industry. Suppose they agree to split the market in two. However, the two firms have different levels of cost efficiency. Suppose the demand and cost equations have been estimated as follows: P = 60-0.2Q MCA = 5+2Q MCB = 10+Q Tasks: 1. Calculate the optimal price and quantity needed to maximize profit for firms A and B. 2. Plot the demand and supply curve and show the optimal quantities and prices for each firm. 3. Discuss the difficulties of sustaining these optimal quantities and prices.
Exercise 2 is attached in the photo file.
Leave a Reply
You must be logged in to post a comment.