Homework answers / question archive / Problem 1: Oligopoly (30 points) Suppose that there are only two copper-producing countries, Chile (country 1) and Peru (country 2) with identical total cost functions TC(91) = 291 and TC(92) = 242, where 91 denotes the amount of copper generated by country 1 and 42 denotes the output level of country 2 (in tons)

Problem 1: Oligopoly (30 points) Suppose that there are only two copper-producing countries, Chile (country 1) and Peru (country 2) with identical total cost functions TC(91) = 291 and TC(92) = 242, where 91 denotes the amount of copper generated by country 1 and 42 denotes the output level of country 2 (in tons)

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Problem 1: Oligopoly (30 points) Suppose that there are only two copper-producing countries, Chile (country 1) and Peru (country 2) with identical total cost functions TC(91) = 291 and TC(92) = 242, where 91 denotes the amount of copper generated by country 1 and 42 denotes the output level of country 2 (in tons). Assume that the market demand for copper is given by the inverse demand function PQ) = 30 – Q, where prices are given in thousands of dollars and Q = 91 +92 denotes the total amount of copper traded. (a) (10 points) Suppose that both countries make sequential decisions about the amount of copper to be produced. Assume that Chile is the leader whereas Peru is the follower. What is the residual demand of the follower? What is the marginal revenues of the follower? Find Peru's reaction function. po PO