If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price.
Market demand curve
Q = 200 - 4p
When the call for curve is an immediate line and general price is 0, the duopolistic unearths it most worthwhile to deliver half of the maximum demand of an excellent.
At P =Rs zero, marketplace call for is Q = two hundred – 4 (0) = 200 units
If firm B does not produce anything, then the market demand confronted by means of company A is 2 hundred devices. consequently, The supply of firm A = ½ * 200 = a hundred gadgets within the next spherical, the portion of market call for faced via company B is 200 -200/2 = two hundred – one hundred = one hundred devices.
Consequently, firm B might supply ½ (two hundred – two hundred/2) = 50 units
accordingly, company B has modified its supply from 0 to 50 gadgets. To this company A might react thus and the demand faced through firm A can be 2 hundred -1/2*(two hundred-200/2) = two hundred – 50 = one hundred fifty devices consequently, firm A might supply = 150/2 = seventy five gadgets
The amount furnished through firm A and firm B is represented within the table under.
Round |
Firm |
Quantity Supplied |
1 |
B |
0 |
2 |
A |
½ * 200 = 200/2 = 100 |
3 |
B |
½ * ( 200 – ½ * 200 ) = 200/2 – 200/4 |
4 |
A |
½ * 200–½(200–½∗200)200–½(200–½∗200) = 200/2 – 200/4 + 200/8 |
5 |
B |
½ * {200 – ½ 200–(1/2200–½∗200)200–(1/2200–½∗200)} = 200/2 – 200/4 + 200/8 – 200/16 |
Therefore, the equilibrium output supplied by firm A = 200/2 – 200/4 + 200/8 -200/16+200/32+ 200/64 + 200/128 + 200/256+… = 200/3 units
Similarly, the equilibrium output supplied by firm B = 200/3 units.
Market Supply = Supply by firm A+ Supply by firm B = 200/3 + 200/3
Equilibrium output or Market Supply = Q = 400/3 units…………… (1)
For equilibrium price
Q = 200 - 4p
= 200 – Q
P = 50 – Q/4
P = 50 – ¼ (400/3) (from (1))
P = 50 – 100/3
P = 50-100/3
P = Rs. 50/3
Therefore, the equilibrium output (total) is 400/3 units and equilibrium cost is Rs. 50/3.
List the three different ways in which oligopoly firms may have.
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
Marginal Revenue |
100 |
90 |
80 |
70 |
60 |
50 |
40 |
30 |
20 |
10 |
Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs.1000, describe the equilibrium in the short run and in the long run.
Comment on the shape of MR curve in case when TR curve is a
(a) Positively sloped straight line
(b) Horizontal straight line
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
What is meant by prices being rigid? How can oligopoly behavior lead to such an outcome?
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
If the monopolist firm of Exercise 3 was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market). And the government has decided to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?
The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity are given in the schedules below.
Quantity |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Price |
52 |
44 |
37 |
31 |
26 |
22 |
19 |
16 |
13 |
Quantity |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Price |
10 |
60 |
90 |
100 |
102 |
105 |
109 |
115 |
125 |
Use the information given to calculate the following:
(a) The MIR and MC schedules
(b) The quantities for which MIR and MC are equal
(c) The equilibrium quantity of output and the equilibrium price of the commodity
(d) The total revenue, total cost and total profit in the equilibrium
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.
Explain the concept of a production function
Explain market equilibrium.
Discuss the central problems of an economy.
What are the characteristics of a perfectly competitive market?
What do you mean by the budget set of a consumer?
What is the total product of input?
When do we say that there is an excess demand for a commodity in the market?
What do you mean by the production possibilities of an economy?
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
What is budget line?
What happens to the budget set if both the prices as well as the income double?
When do we say that there is an excess demand for a commodity in the market?
What is the law of variable proportions?
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
What do you mean by substitutes? Give examples of two goods which are substitutes of each other.
Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs 10.
Quantity Sold | TR | MR | AR |
---|---|---|---|
0 1 2 3 4 5 6 |
How is the optimal amount of labor determined in a perfectly competitive market?
What do you mean by the production possibilities of an economy?
How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
What do you mean by a normal good?