The Inverse Demand for Designer Blankets Is Given by P

question 32

Multiple Choice

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C₁ = 0.02q₁², where q₁ is the number it brings to market. Shop 2's cost function is given by C₂ = 0.02q₂², where q₂ is the number it brings to market. Given that the two shops compete by setting output (Cournot) , the equilibrium market price is $____.

• A) 32.65
• B) 30.76
• C) 28.58
• D) 23.43

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Definitions:

Federal Government

A system of government where power is divided between a central national government and various regional governments.

Taxes Collected

The total amount of money received by a government from individuals, corporations, and other entities as compulsory charges imposed on income, property, sales, etc., for public financing.

Equity

The concept of fairness in economics, which can refer to the distribution of wealth, income, or resources within a society.

Efficiency

The optimal use of resources to achieve the desired ends with minimal waste or expense; often relates to economic efficiency where resources are allocated in a way that maximizes the net benefit to society.