Question-4 (Duopoly)There are two firms in the pumpkin industry: C and S. Thedemand function for pumpkins is q = 3, 2001, 600p. The total number of pumpkins sold at themarket is q =qc+qs, where qc is the number that C firm sells and qs is the number that S firmsells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how manypumpkins they produces.1. Every spring, each of the firms decides how many pumpkins to grow. They both know thelocal demand function and they each know how many pumpkins were sold by the other firmlast year. In fact, each firm assumes that the other firm will sell the same number this year asits sold last year. So, for example, if firm S sold 100 pumpkins last year, firm C believes thatfirm S will sell 100 pumpkins again this year. If firm S sold 100 pumpkins last year, what doesfirm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year?2. Suppose that in year 1, firm C produced 200 pumpkins and firm S produced 1,000 pumpkins.In year 2, how many would firm C produce? How many would firm S produce?

a)To find out what Firm C thinks the price of pumpkins will be if it sells 1,200 pumpkins this year,…

Answered: Question-4 (Duopoly) There are two…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.6IP

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