Hale's One Stop and Auto Service competes with Murray's Gas Mart. The local demand is:
Q^d = 25 - 10P $\iff$ P = 2.50 - 0.1 Q^d. Both firms sell exactly the same quality of gasoline. Thus, if the firms charge a different price, the lower price firm will capture the entire market share. If the firms charge the same price, they will split the market share. The marginal cost functions are both constant at $1.25. If the firms compete by setting price, what is the market output level? What is the market price level?

Question

Hale's One Stop and Auto Service competes with Murray's Gas Mart. The local demand is:
Q^d = 25 - 10P

\iff

P = 2.50 - 0.1 Q^d. Both firms sell exactly the same quality of gasoline. Thus, if the firms charge a different price, the lower price firm will capture the entire market share. If the firms charge the same price, they will split the market share. The marginal cost functions are both constant at $1.25. If the firms compete by setting price, what is the market output level? What is the market price level?

Quizplus · Accepted Answer

The Answer of Hale's One Stop and Auto Service competes with Murray's Gas Mart. The local demand is: Q^d = 25 - 10P$\iff$ P = 2.50 - 0.1 Q^d. Both firms sell exactly the same quality of gasoline. Thus, if the firms charge a different price, the lower price firm will capture the entire market share. If the firms charge the same price, they will split the market share. The marginal cost functions are both constant at $1.25. If the firms compete by setting price, what is the market output level? What is the market price level?

Hale's One Stop and Auto Service Competes with Murray's Gas ⟺ \iff⟺

Hale's One Stop and Auto Service Competes with Murray's Gas $\iff$