How do oligopolistic firms that sell differentiated products determine their prices?
What will be an ideal response?
With differentiated products, consumers view the firms' products as being somewhat distinct. If a single firm cuts its prices, it will gain market share from the other. But because the firms' products are not perfect substitutes, a firm that undercuts its rival's price will not capture the entire market. In an oligopoly with differentiated goods, the demand for one firm's good depends on the price the firm sets for its goods and the prices other firms set for their goods. In a Nash equilibrium, all firms in the industry choose prices that are best responses to the prices the other firms choose.
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Protectionism
Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. How much does Kate produce in the Nash equilibrium?
A. 2,000 B. 1,333.33 C. 800 D. 4,000
A dominant-firm's residual demand curve is
A) the horizontal difference between the market demand curve and the supply curve of the fringe firms. B) the vertical difference between the market demand curve and the supply curve of the fringe firms. C) the demand curve left for the fringe firms after the dominant firm has determined an output level. D) None of the above.
Identify the international organization that makes loans to developing countries
a. The World Bank b. The Federal Reserve c. The World Trade Organization d. The Industrial Development Board e. The Bank of England