The market for widgets consists of two firms that produce identical products

Marketing Jan 11, 2021

The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the firms independently produces a quantity of output, and these quantities are then sold in the market at a price that is determined by the market demand function: P = 160 - 2Q (Q = Q[Math Processing Error]1 + Q[Math Processing Error]2). Marginal cost is constant at $2 for both firms, and marginal revenue is 160 - 4Q.

a. What kind of oligopoly model best describes this market?

b. Calculate the output and profit for each firm.

c. If the two firms can merge into one, will they be able to earn a higher profit? Explain.

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