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. The total cost functions for the two companies are TCA = 1,500+55QA+Q₁² 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). For Company A, the long-run equilibrium output is For Company B, the long-run equilibrium output is TCB=1,200+20QB+2QB² At the equilibrium output, Company A earns total profits of $ total industry profits are S and the selling price is $ and the selling price is and Company B earns total profits of $ Therefore, the
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. The total cost functions for the two companies are TCA = 1,500+55QA+Q₁² 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). For Company A, the long-run equilibrium output is For Company B, the long-run equilibrium output is TCB=1,200+20QB+2QB² At the equilibrium output, Company A earns total profits of $ total industry profits are S and the selling price is $ and the selling price is and Company B earns total profits of $ Therefore, the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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. The total cost functions for the two companies are
TCA 1,500+55QA+QA²
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).
For Company A, the long-run equilibrium output is
For Company B, the long-run equilibrium output is
TCB= 1,200+20QB+2QB²
At the equilibrium output, Company A earns total profits of
total industry profits are $
and the selling price is
and the selling price is
and Company B earns total profits of
Therefore, the
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