Suppose a Single Firm Has Constant Marginal Cost and Faced

question 3

Essay

Suppose a single firm has constant marginal cost and faced the demand curve
a.Illustrate in this graph how a monopolist who cannot price discriminate would price this good.What is the monopoly price and quantity?
b.Suppose two firms with the same marginal cost as the monopolist operated in this market instead.Suppose quantity is the strategic variable and the two firms simultaneously choose quantity.On a graph with firm 1's output on the horizontal and firm 2's output on the vertical, illustrate firm 2's best response function with numerical labels for each intercept.
c.Add firm 1's best response function and determine the Nash equilibrium quantities.
d.What's the equilibrium price resulting from the quantities you determined in (c)?
e.What would be the equilibrium price if the strategic variable for the firms were price instead?

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Definitions:

Homogenous

Products, services, or groups that are identical, similar in nature, and indistinguishable from each other in the eyes of the consumer.

Substitute Product

A product or service that consumers can use in place of another to satisfy the same need or desire.

Complementary Product

A product that adds value to another, typically unrelated product when used together.

Energy Drink

A type of beverage containing stimulant compounds, typically caffeine, designed to provide mental and physical stimulation.