question archive The inverse market demand for fiberglass insulation is given by
The inverse market demand for fiberglass insulation is given by
Subject:MarketingPrice:2.88 Bought3
The inverse market demand for fiberglass insulation is given by . This is a homogeneous product and there are only two firms who produce fiberglass, American Fiberglass Co. and Benchmark Fiberglass Co., so . American has a (constant) marginal cost of production of 100 while Benchmark has a marginal cost of 120. Suppose competition can be reasonably modeled by assuming that firms strategically set quantities and they make their quantity choices simultaneously. Show how to derive the Cournot equilibrium in this market and report the resulting levels of production for each firm and market price.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Given that the two duopolies will produce at a point where profit is maximized. The profit will be maximized when the slope of the profit function is equal to zero .
Taking the first partial derivatives:
Solving the two simultaneous equations:
American Fiberglass Co. and Benchmark Fiberglass Co. will produce 120 units, and 110 units, respectively and sell at $340 each.
