In a market with a homogeneous product, two companies, A and B,
produce with the same technology. The cost function of company i is
given as C (qi) = 10qi (There are no fixed costs). Demand for the
good is given by Q (p) = 100-p.
a) Suppose companies choose their quantities at the same time.
Determine the reaction function of each company in relation to the
quantity produced by its competitor and plot it in a diagram. Find
the equilibrium quantity of each business and the purchase
price.
b) Find the equilibrium gains of each business and the loss of
prosperity created by this bipolar competition in the market. Plot
the market equilibrium effect, the bipolar equilibrium effect and
the loss of prosperity created by the duopoly.
c) "If companies set their prices (instead of their quantities)
at the same time, the market equilibrium is effective". Do you
agree or disagree with the above statement? Document your views in
detail.
In a market with a homogeneous product, two companies, A and B, produce with the same technology. The cost function of c
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