Ford and Tesla will late 2021 start the sales of two new cars, namely Ford Mustang Mach-E and Tesla Model Y. These cars are both medium sized SUVs and in general very similar. There are really no other good competitors of the same size, range, and performance. Both car manufacturers must decide on production for the first quarter of 2021 already now. They are announcing their choice of quantity at the same time. The total demand for these two cars in the first quarter is given by p = 100, 000 − 2Q where Q = qT + qF is the total number of cars, and qT and qF is the supply of cars from Tesla and Ford, respectively. Marginal costs of each car is 25,000 for both producers. a) What is the reaction curve of each firm? b) What is the equilibrium quantity and price
Ford and Tesla will late 2021 start the sales of two new cars, namely Ford Mustang Mach-E
and Tesla Model Y. These cars are both medium sized SUVs and in general very similar.
There are really no other good competitors of the same size, range, and performance. Both
car manufacturers must decide on production for the first quarter of 2021 already now. They
are announcing their choice of quantity at the same time. The total demand for these two cars
in the first quarter is given by p = 100, 000 − 2Q where Q = qT + qF is the total number of
cars, and qT and qF is the supply of cars from Tesla and Ford, respectively. Marginal costs of
each car is 25,000 for both producers.
a) What is the reaction curve of each firm?
b) What is the equilibrium quantity and price?
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