Homework answers / question archive / Consider a homogeneous product industry with market demand given by Q(p) = 1 - p

Consider a homogeneous product industry with market demand given by Q(p) = 1 - p

Sociology

Share With

Consider a homogeneous product industry with market demand given by Q(p) = 1 - p. There is currently one incumbent firm and one potential entrant. Entry into the industry requires a sunk cost of F. Both firms have zero marginal cost: MC =0 for both firms. Which value of F will make the Incumbent choose to deter entry? OF=1 OF=0 OF = 0.5 None of the above O All of the first three options. Two firms are producing an identical product. The market demand is linear, its inverse is given by PIQ) = a - Q. Both firms have a constant marginal cost. Firm 1's marginal cost is c1, Firm2's marginal cost is c2. Let q1 be the output level of Firm 1, and q2 the output level of Firm 2. If c1 = c2/2 then in the Nash equilibrium of Cournot competition (assume in equilibrium q2 > 0) we will have O 91 = 1.592 q1 = 292 O q1 = 392 0 91 = 492 Any of the above is possible depending on the value of a.