Consider a Cournot duopoly with the following inverse demand function: P = 4,000 – 4Q1 - 4Q2. The firms' marginal costs are identical and are given by MC;(Q¡) = 120Qİ. Based on this information, firm 1 and 2's reaction functions are Multiple Choice

Consider a Cournot duopoly with the following inverse demand function: P = 4,000 – 4Q1 - 4Q2. The firms' marginal costs are identical and are given by MC;(Q¡) = 120Qİ. Based on this information, firm 1 and 2's reaction functions are Multiple Choice

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 duopoly faces an inverse market demand of P(Q) = 240−Q.Firm 1 has a constant marginal cost of MC1 (q1) = $10.Firm 2's constant marginal cost is MC2 (q2) = $20.Assume fixed costs are negligible for both firms. Calculate the output of each firm, market output, and price if there is (A) a collusive equilibrium or (B) a Cournot equilibrium. (A) Collusive equilibrium (Enter your responses rounded to two decimal places) The collusive equilibrium occurs where q1 equals ?and q2 equals ? Market output is ? The collusive equilibrium price is ? (B) Cournot equilibrium (Enter your responses using rounded to two decimal places) The Nash-Cournot equilibrium occurs where q1 equals ? and q2 equals ? Market output is ? The equilibrium occurs at a price of ?
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