Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P = 180 −3 (Q1 + Q2). They estimate costs to be C1(Q1) = 21Q1 and C2(Q2) = 33Q2.   a. Determine the reaction function for each firm. Firm 1: Q1 = − Q2   Firm 2: Q2 = − Q1     b. Calculate each firm’s equilibrium output. Firm 1:   Firm 2:     c. Calculate the equilibrium market price. $     d. Calculate the profit each firm earns in equilibrium. Firm 1: $   Firm 2: $

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Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P = 180 −3 (Q1 + Q2). They estimate costs to be C1(Q1) = 21Q1 and C2(Q2) = 33Q2.

 

a. Determine the reaction function for each firm.

Firm 1: Q1 = − Q2

 

Firm 2: Q2 = − Q1

 

 

b. Calculate each firm’s equilibrium output.

Firm 1:

 

Firm 2:

 

 

c. Calculate the equilibrium market price.

$

 

 

d. Calculate the profit each firm earns in equilibrium.

Firm 1: $

 

Firm 2: $

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