Assume that the market for wind turbines is a Bertrand oligopoly with two produc

Question

Assume that the market for wind turbines is a Bertrand oligopoly with two producers: General Electric (an American company) and Nordex (A German company). The U.S. market demand for wind turbines is given below. The marginal cost for each firm is $80,000. There are no costs of shipping turbines from one country to the other.P=100,00020Q

1.What will be the equilibrium price and quantity of turbines produced and sold by each company if there is free trade? How much profit will each firm earn?

2.Suppose that the German government agrees to voluntarily limit exports of wind turbines to the United States to 500 units. How many turbines will General Electric sell in the United States and what price will it charge? How much profit will each firm earn?

Explanation / Answer

1) P=MC

80000=100000-20q

20q=20000

q=1000

p=100000-20000

price=80000

profit= 80000x1000=80000000

Each firm will earn= 40000000

2) TR= 500x80000= 40000000

Profit=80000x1000- 40000000

=40000000

Each firm earns =20000000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.