Help with everything Tinytown. Tennessee has 140 residents. There are two firms servicing the town, ATT andVerizon. The "good" being sold is cell phone service with unlimited anytime minutes and a freephone. The inverse demand function for service in the town is given by the following.P=70-0.50Each firm faces this market demand function.Since the towers are already in place, we can assume neither firm has any significant fixed cost.Both firms have identical cost structures with the cost function for each firm being given by thefollowing.C =100Part a: Suppose the two firms engage in Bertrand competition, what market price will result,how many units will each firm sell, how many units in total will be sold, and how much profitwill each earn?Part b: Now suppose the two firms agree to collude and behave as a single monopoly and sharethe outcome (customers serviced) equally, what market price will result, how many units willeach firm sell, how many units in total will be sold, and how much profit will each earn?Part c: Following the collusive agreement in part b, suppose ATT decides to renege on theagreement and produces Q = 40, what happens to the market price? ATT's profits? Is it in ATT'sinterest to renege on the agreement?Part d: Given your answer in part c, does Verizon have an incentive to renege on agreement? Ifso and it follows ATT and produces Q = 40, what happens to the market price? How much willeach firm earn if both renege? How does this compare to the outcome where both stuck to theagreement?Part e: Given your result in part d, does either firm have an incentive to further increase unitssold?Part f: Describe the Nash equilibrium that emerges once the competitors begin reneging on thecollusive agreement. Why does this result emerge?

Tinytown, Tennessee has 140 residents.Number of firms in the town=2, named ATT and Verizon.…

Tinytown, Tennessee has 140 residents. There are two firms servicing the town, ATT and Verizon. The "good" being sold is cell phone service with unlimited anytime minutes and a free phone. The inverse demand function for service in the town is given by the following. P=70-0.50 Each firm faces this market demand function. Since the towers are already in place, we can assume neither firm has any significant fixed cost. Both firms have identical cost structures with the cost function for each firm being given by the following. C=100

Tinytown, Tennessee has 140 residents. There are two firms servicing the town, ATT and Verizon. The "good" being sold is cell phone service with unlimited anytime minutes and a free phone. The inverse demand function for service in the town is given by the following. P=70-0.50 Each firm faces this market demand function. Since the towers are already in place, we can assume neither firm has any significant fixed cost. Both firms have identical cost structures with the cost function for each firm being given by the following. C=100

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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