Answer :

Given – Market demand curve


Q = 200 - 4p


When the demand curve is a straight line and total cost is zero, the duopolistic finds it most profitable to supply half of the maximum demand of a good.


At P = Rs 0, market demand is Q = 200 - 4 (0) = 200 units


If firm B does not produce anything, then the market demand faced by firm A is 200 units. Therefore, The supply of firm A = 100 units


In the next round, the portion of market demand faced by firm B is =200 - 100 = 100 units. Therefore, Firm B would supply = 50 units


Thus, firm B has changed its supply from zero to 50 units. To this firm A would react accordingly and the demand faced by firm A will be


= 200 – 50 = 150 units


Therefore, Firm A would supply = =75 units.


The quantity supplied by firm A and firm B is represented in the table below –



Therefore, the equilibrium output supplied by firm A = 200/3 units = the equilibrium output supplied by firm B


Market Supply = 200/3 + 200/3 = 400/3 units


For equilibrium price


q = 200 - 4p


4p = 200 – q


P = 50 – q/4


P = 50 – (400/3) /4


P = 50 – 400/12 = 16.67


Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
caricature
view all courses
RELATED QUESTIONS :

If duopoly behaviNCERT - Introductory Microeconomics

Explain why the dNCERT - Introductory Microeconomics

What is meant by NCERT - Introductory Microeconomics

List the three diNCERT - Introductory Microeconomics

What is the reasoNCERT - Introductory Microeconomics

Will the monopoliNCERT - Introductory Microeconomics

The market demandNCERT - Introductory Microeconomics

What is the valueNCERT - Introductory Microeconomics

Comment on the shNCERT - Introductory Microeconomics