A homogeneous products duopoly faces a market demand function given by Q = 20-2P, where Q = Q1 + Q2. Both firms have a constant marginal cost MC = 4.1. Suppose the two firms set their quantities simultaneously by guessing the other firm's quantity choice. Derive the equation of each firm's reaction curve and then graph these curves.2. What is the Cournot equilibrium quantity and price in this market for each firm?3. What would the equilibrium price in this market be if it were perfectly competitive?4. What is the Bertrand equilibrium price in this market? A homogeneous products duopoly faces a market demand functiongiven by Q = 20 - 2P, where Q = Q₁ + Q₂. Both firms have aconstant marginal cost MC = 4.1. Suppose the two firms set their quantities simultaneously byguessing the other firm's quantity choice. Derive the equation ofeach firm's reaction curve and then graph these curves.2. What is the Cournot equilibrium quantity and price in this marketfor each firm?3. What would the equilibrium price in this market be if it wereperfectly competitive?4. What is the Bertrand equilibrium price in this market?

Q=20-2PInverse demand functionP=10-0.5QQ=q1+q2MC1=4MC2=4

Answered: A homogeneous products duopoly faces a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A homogeneous products duopoly faces a market demand function given by Q = 20-2P, where Q = Q1 + Q2. Both firms have a constant marginal cost MC = 4. 1. Suppose the two firms set their quantities simultaneously by guessing the other firm's quantity choice. Derive the equation of each firm's reaction curve and then graph these curves. 2. What is the Cournot equilibrium quantity and price in this market for each firm? 3. What would the equilibrium price in this market be if it were perfectly competitive? 4. What is the Bertrand equilibrium price in this market?

A homogeneous products duopoly faces a market demand function
given by Q = 20 - 2P, where Q = Q₁ + Q₂. Both firms have a
constant marginal cost MC = 4.
1. Suppose the two firms set their quantities simultaneously by
guessing the other firm's quantity choice. Derive the equation of
each firm's reaction curve and then graph these curves.
2. What is the Cournot equilibrium quantity and price in this market
for each firm?
3. What would the equilibrium price in this market be if it were
perfectly competitive?
4. What is the Bertrand equilibrium price in this market?

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