Problem
Perfectly Competitive market vs duopoly market Suppose the daily demand function of pizza in St Catherines Q^d=2175-5p. For 1 pizza store, the variable cost of making Qpizza per day is C(q)=0.2q^2 - 5q there is a 2000$ fixed cost. There is free entry in the long run
A. What is the long run market equilibrium price and quantity in this market? How many firms in the market?
B. If the marginal cost decreased by 2$ per pizza what is the new short run market equilibrium price and quantity.
C. Draw graphs to show the short run and the long run responses of both an individual firm and the market in part b.
Now assume the market demand function does not change, consider duopoly market in which the marginal cost of each firm is 35.
• What is the nash equilibrium price and quantity in this Stackelberg model.