The supply schedule shows the specific quantity of a good that suppliers are willing and able to:
a. demand at various prices.
b. produce at various costs.
c. hold back from the market when competition is reduced.
d. provide at different prices.
e. demand at various costs.
d
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Two firms compete in a market by selling imperfect substitutes. The demand equations are given by the following equations:
Q1 = 50 - p1 + p2 Q2 = 50 - p2 + p1 For now, assume that each firm has a marginal cost and average cost of 0. a. From the equations, how can you tell these goods are substitutes? How can you tell they are imperfect substitutes? b. Suppose the firms compete by simultaneously choosing price. Find the best response function of each firm as a function of the other firm's price. c. Compute the equilibrium price and quantity for each firm. d. Suppose firm 1 (and only firm 1 ) had a marginal and average cost of $10. How would the equilibrium change? How does this compare to the Bertrand result when the firms sell perfect substitutes?
When producers would have been willing to accept lower prices at various quantities produced than the market clearing price, the differences are called
A) producer surplus. B) monopoly profits. C) opportunity cost. D) consumer surplus.