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## linear demand function for the two good… Show more Two fir

Paper help Economics linear demand function for the two good… Show more Two fir

# linear demand function for the two good… Show more Two fir

linear demand function for the two good… Show more Two firms, A and B, produce goods A and B, respectively. The linear demand function for the two goods are respectively,Ã‚ Qa = 100 – 4Pa + 1.5Pb Qb = 120 – 2Pb + 0.5Pa Production costs are given by Ca (Qa) = 2Qa and Cb (Qb) = 3Qb The two firms engage in a price war. A) Derive the equations for the best response functions for each firm B) Sketch a graph of the best response functions C) If firm A expects firm B to set its price at \$20, what is firm A’s best response? If firm B predicts that firm A will price good A at \$36, what is firm B’s best response?Ã‚ D) What is the NASH EQUILIBRIUM price and quantity for each firm? E) How much profit does each firm earn in Nash Equilibrium? • Show less

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