Microeconomics Assignment

In a duopolist market two firms can produce at a constant average and marginal cost of AC = MC = 2. They face the market demand curve P = 14 – Q, where Q = Q1 + Q2, here Q1 is the output of Firm 1, Q2 is the output of Firm 2. In the Cournot’s model: (i) Find the action-reaction functions of the two firms. (ii) What are the profits of the two firms. (iii) Calculate the profit maximizing levels of output (Q1 and Q2) and price.

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Introduction In the Cournot model of duopoly, two firms compete by choosing quantities simultaneously and independently. Each firm chooses its output assuming the other firm’s output is fixed. The goal is to maximise profit given the market demand and cost conditions. Let’s solve the numerical parts of this problem step by step. Given: Market demand: […]

In a duopolist market two firms can produce at a constant average and marginal cost of AC = MC = 2. They face the market demand curve P = 14 – Q, where Q = Q1 + Q2, here Q1 is the output of Firm 1, Q2 is the output of Firm 2. In the Cournot’s model: (i) Find the action-reaction functions of the two firms. (ii) What are the profits of the two firms. (iii) Calculate the profit maximizing levels of output (Q1 and Q2) and price. Read More »

Give reasons for diminishing returns to scale accruing to a firm in the long run.

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Introduction In economics, the concept of returns to scale explains how output changes when all inputs are increased in the same proportion. In the long run, all factors of production are variable. Initially, firms may enjoy increasing returns to scale, but beyond a certain point, they often experience diminishing returns to scale. This means that

Give reasons for diminishing returns to scale accruing to a firm in the long run. Read More »

How is Monopoly different from that under Perfect Competition? Explain the long run equilibrium under Monopoly.

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Introduction Monopoly and Perfect Competition are two extreme forms of market structures in economics. While Perfect Competition represents a market with many sellers and buyers dealing in identical products, Monopoly stands for a market where a single seller dominates with no close substitutes. Understanding the differences between these two market structures helps us understand how

How is Monopoly different from that under Perfect Competition? Explain the long run equilibrium under Monopoly. Read More »

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