Asked by
Mohit bhatt
on Oct 14, 2024
Verified
Suppose that Grinch and Grubb go into the wine business in a small country where wine is difficult to grow.The demand for wine is given by p $480 .2Q, where p is the price and Q is the total quantity sold.The industry consists of just the two Cournot duopolists, Grinch and Grubb.Imports are prohibited.Grinch has constant marginal costs of $30 and Grubb has marginal costs of $60.How much is Grinch's output in equilibrium?
A) 1,600
B) 1,200
C) 800
D) 400
E) 2,400
Cournot Duopolists
Firms in a duopoly market structure (two firms) where each firm determines its production level assuming the other firm's production level is fixed, as in the Cournot competition model.
Marginal Costs
The fluctuation in complete costs associated with an increase in production by a single unit.
Demand for Wine
The desire of consumers to purchase wine, influenced by factors such as price, taste preferences, and income levels.
- Exercise the concepts of Cournot equilibrium to discover the production capacity of companies in markets of duopoly nature.
- Evaluate the role of marginal costs and demand elasticity in determining firms' profits and competitive strategies.
Verified Answer
JB
Learning Objectives
- Exercise the concepts of Cournot equilibrium to discover the production capacity of companies in markets of duopoly nature.
- Evaluate the role of marginal costs and demand elasticity in determining firms' profits and competitive strategies.