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?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
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![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 e2(q2) = 2q2. The inverse market demand function is given by
P = 100 – 5(q1 +92).
(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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb185c4f8-45fd-4a32-b444-93e3110a115d%2F871bf7cd-54e2-42a0-a5e9-1a0d68c397f9%2Fw9ihd0y_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 e2(q2) = 2q2. The inverse market demand function is given by
P = 100 – 5(q1 +92).
(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?
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