Please help me with this question 2. Two firms produce luxury sheepskin auto seat covers, Western Where (WW) andB.B.B. Sheep (BBBS). Each firm has a cost function given byC(q) = 30q+1.5q²The market demand for these seat covers is represented by the inverse demandequationP=300-30where Q=q1 + q2, total output.a. If each firm acts to maximize its profits, taking its rival's output as given (i.e.,the firms behave as Cournot oligopolists), what will be the equilibrium quantitiesselected by each firm? What is total output, and what is the market price? Whatare the profits for each firm?b. It occurs to the managers of WW and BBBS that they could do a lot better bycolluding. If the two firms collude, what will be the profit-maximizing choice ofoutput? The industry price? The output and the profit for each firm in this case?c. The managers of these firms realize that explicit agreements to collude areillegal. Each firm must decide on its own whether to produce the Cournotquantity or the cartel quantity. To aid in making the decision, the manager ofWW constructs a payoff matrix like the one below. Fill in each box with theprofit of WW and the profit of BBBS. Given this payoff matrix, what outputstrategy is each firm likely to pursue?Round off profits to whole dollars, the payoff matrix is as follows:BBBSProfit Payoff Matrix(WW profit, BBBS profit)WW Produce Cournot qWW Produce Cartel 9ProduceCournot qProduceCartel qd. Suppose WW can set its output level before BBBS does. How much will WWchoose to produce in this case? How much will BBBS produce? What is themarket price, and what is the profit for each firm? Is WW better off by choosingits output first? Explain why or why not.

Given: There are 2 firms: Western Where (WW) and B.B.B. Sheep (BBBS). The cost function of each firm…

2. Two firms produce luxury sheepskin auto seat covers, Western Where (WW) and B.B.B. Sheep (BBBS). Each firm has a cost function given by C(q) = 30q+1.5q² The market demand for these seat covers is represented by the inverse demand equation P=300-30 where Q=q1 + 92, total output. a. If each firm acts to maximize its profits, taking its rival's output as given (i.e., the firms behave as Cournot oligopolists), what will be the equilibrium quantities selected by each firm? What is total output, and what is the market price? What are the profits for each firm?

2. Two firms produce luxury sheepskin auto seat covers, Western Where (WW) and B.B.B. Sheep (BBBS). Each firm has a cost function given by C(q) = 30q+1.5q² The market demand for these seat covers is represented by the inverse demand equation P=300-30 where Q=q1 + 92, total output. a. If each firm acts to maximize its profits, taking its rival's output as given (i.e., the firms behave as Cournot oligopolists), what will be the equilibrium quantities selected by each firm? What is total output, and what is the market price? What are the profits for each firm?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 5E

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