Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:P = 200 - QA - QBwhere QA and QB are the quantities sold by the respective firms and P is the sellingprice. Total cost functions for the two companies areTCA = 1500 + 55QA + Q2ATCB = 1200 + 20QB + 2Q2BAssume that the firms act independently as in the Cournot model (i.e., each firmassumes that the other firm’s output will not change).a. Determine the long-run equilibrium output and selling price for each firm.b. Determine Firm A, Firm B, and total industry profits at the equilibrium solutionfound in Part (a).
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:P = 200 - QA - QBwhere QA and QB are the quantities sold by the respective firms and P is the sellingprice. Total cost functions for the two companies areTCA = 1500 + 55QA + Q2ATCB = 1200 + 20QB + 2Q2BAssume that the firms act independently as in the Cournot model (i.e., each firmassumes that the other firm’s output will not change).a. Determine the long-run equilibrium output and selling price for each firm.b. Determine Firm A, Firm B, and total industry profits at the equilibrium solutionfound in Part (a).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:
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 + 55QA + Q2A
TCB = 1200 + 20QB + 2Q2B
Assume that the firms act independently as in the Cournot model (i.e., each firm
assumes that the other firm’s output will not change).
a. Determine the long-run equilibrium output and selling price for each firm.
b. Determine Firm A, Firm B, and total industry profits at the equilibrium solution
found in Part (a).
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