4. Consider a Cournot Oligopoly with two firms, where firm 1 is twice as efficient as firm 2. In particular, firm l's cost function is c1(q1) = q1, while firm 2's cost function is c2(q2) = 2q2. The inverse market demand function is given by P= 100 – 5(q1+q2). (a) Find the firms' reaction (best response) functions. (b) Find the firms' equilibrium output levels and their profits. Does firm 1 make twice the profit of firm 2?

4. Consider a Cournot Oligopoly with two firms, where firm 1 is twice as efficient as firm 2. In particular, firm l's cost function is c1(q1) = q1, while firm 2's cost function is c2(q2) = 2q2. The inverse market demand function is given by P= 100 – 5(q1+q2). (a) Find the firms' reaction (best response) functions. (b) Find the firms' equilibrium output levels and their profits. Does firm 1 make twice the profit of firm 2?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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