Consider a duopoly market with 2 firms. Aggregate demand in this market is given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B. Assume the firms compete a la Cournot. a) Find the inverse demand in this market. Note that marginal revenue for both firms is given by MRA=500-2QA-QB, MRB=500-QA-2QB. b) Describe what a best-response curve is and how to find it. c) Derive the best-response function for each firm. d) What are the equilibrium quantities? e) What is the total quantity supplied on this market? f) What is the equilibrium price in this market?
Consider a duopoly market with 2 firms. Aggregate
Q = 500 – P,
where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B.
Assume the firms compete a la Cournot.
a) Find the inverse demand in this market.
Note that marginal revenue for both firms is given by
MRA=500-2QA-QB,
MRB=500-QA-2QB.
b) Describe what a best-response curve is and how to find it.
c) Derive the best-response function for each firm.
d) What are the
e) What is the total quantity supplied on this market?
f) What is the
**if possible, please answer my questions in typing as its hard for me to read works in hand-written, thanks
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