Assume that two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following linear demand functions: P=200-QA-QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA = 1500+55 QA +QA2 TCB = 1200+20 QB +2QB2 Assume that the firms form a cartel and maximize total industry profits, a. Determine the optimal output and selling price for each firm. b. Determine Frim A, Firm B, and total industry profits at the optimal solution found in part (a). c. Show that the marginal cost of the two firms are equal at the optimal solution found in part (a)
Assume that two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following linear demand functions:
P=200-QA-QB
where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are
TCA = 1500+55 QA +QA2
TCB = 1200+20 QB +2QB2
Assume that the firms form a cartel and maximize total industry profits,
a. Determine the optimal output and selling price for each firm.
b. Determine Frim A, Firm B, and total industry profits at the optimal solution found
in part (a).
c. Show that the marginal cost of the two firms are equal at the optimal solution
found in part (a).
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