Chapter 14
2.2 The profit-maximizing cartel output is the monopoly output. Setting [&MR|=|MC&] yields [&100|-|4Q|=|20,&] so [&Q|=|20.&] Each of the four firms produces [&q |eq|&][&20/4|=|5.&]
3.1 The inverse demand curve is [&p|=|1|-|0.001Q.&] The first firm’s profit is [&|pi|_{1}|=|[1|-|0.001(q_{1}|+|q_{2})]q_{1} |minus|&][&0.28q_{1}.&] Its first-order condition is [&~rom~d|pi|_{~normal~1}/~rom~d~normal~q_{1}|=|1 |minus|&][&0.001(2q_{1}|+|q_{2})|-|0.28|=|0.&] If we rearrange the terms, the first firm’s best-response function is [&q_{1}|=|360|-|*cf*{1}{2}|thn|q_{2}.&] Similarly, the second firm’s best-response function is
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