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.
What is the supply curve of a firm in the long run?
The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
Distinguish between a centrally planned economy and a market economy.
How does the imposition of a unit tax affect the supply curve of a firm?
A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.
What is the relation between market price and average revenue of a price-taking firm?
What is budget line?
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
What is the value of the MR when the demand curve is elastic?
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
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?
Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?
What is the ‘price line’?
Considering the same demand curve as in exercise 22, now let us understand for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained?
q*= 8+3p for p ≥ 20
= 0 for 0 ≤ p ≤ Rs 20
(a) What is the significance of p =20?
(b) At what price will the market for X be in equilibrium? State the reason for your answer.
(c) Calculate the equilibrium quantity and number of firms.
Will a profit-maximising firm in a competitive market produce a positive level of output in the long run if the market price is less than the minimum of AC? Give an explanation.
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?