Answer to Question #50470 in Microeconomics for nidhi
the expectation that its own output decision will not have an effect on the
decisions of its rivals. The market price is set at a level such that
demand equals the total quantity produced by all firms. Each firm takes the
quantity set by its competitors as a given, evaluates its residual demand, and
then behaves as a monopoly.
If the firms have identical cost functions given by C (Q) = 40 Q, so every firm
produce the quantity, for which MR = MC.
MC = C' = 40
MR = TR' = (P*Q)' = ((100 - Q)*Q)' = 100 - 2Q
So, 100 - 2Q = 40,
Q = 30
So, the equilibrium industry output if the producers are Cournot
competitors is 30*4 = 120 units.
The market price is P = 100 - 30 = $70.
Total profits of each firm are: TP = TR - TC = P*Q - TC = 70*30 - 40*30 = $900.
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A consumer’s utility function is given as U(x,y) = In (x+2y-
) Where x and y are two goods of consumption. (a) Find the indirect utility function of the consumer. (b) Examine if Roy’s law is satisfied by the consumer’s demand function for y. (c) Find the expenditure function of the consumer
where price of x = 1 and price of y = p. (d) Find the Hicksian demand function
) for commodity y, where the price of x is 1 and the price of y is p