QUESTION 1 (30 MARKS) Sam and Lizzy are white maize meal-mealie production duopoly companies that face a market demand f

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Question 1 30 Marks Sam And Lizzy Are White Maize Meal Mealie Production Duopoly Companies That Face A Market Demand F 1 (163.32 KiB) Viewed 21 times

QUESTION 1 (30 MARKS) Sam and Lizzy are white maize meal-mealie production duopoly companies that face a market demand function given by P = 300 - 3Q, where Q = Qs + QL Qs denotes quantity produced by Sam and Q, denotes quantity produced by Lizzy. Both firms have a marginal cost of R100. a) Derive the equation of each firm's reaction curve. (5 marks) b) Find the Cournot equilibrium quantity per company, price, profit and thereafter show them in graph of these curves. (8 marks) c) Find the equilibrium price in the meal mealie market if it is perfectly competitive. (3 marks) d) Find the equilibrium price, quantity and profits if the companies colluded to form a cartel. (6 marks) e) Find the Bertrand equilibrium price in this market. (3 marks) f) Find the Cournot equilibrium quantities and industry price when Sam's marginal cost is R100 while Lizzy's marginal cost is R90. (5 marks) QUESTION 2 (25 MARKS) A cruise liner company has market segments for the adult passengers and younger passengers. The demand curve for the market segment is Qy = 800-100P. The demand curve for the adults' market segment is QA = 1600-100P. In each equation, Q denotes the number of passengers on a cruise and P denotes the price per trip. The marginal cost of serving each passenger in the ship is R2 per trip. a) What is the profit-maximizing number of passengers of each type if the company can price discriminate? (5 marks) b) Assume the cruise liner company has hired you as consultant to advise them on how to maximize their profit. With aid of a clearly done calculations, please advise the company regarding what will happen when the company does not price discriminate? (15 marks)