Economics: Industrial Economics Question: In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse demand function is P = 300 - 2 Q1, where Q = q1 + q2.   Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following: 1. The Nash Equilibrium quantity produced by firm 1 q1* is Choices: A. 33.3 B. 38.3 C. 40 D. 35   2. The Nash Equilibrium quantity produced by firm 2 q2* is Choices: A. 15 B. 53.3 C. 20 D. 21.7   3. The Nash Equilibrium price is Choices: A. 126.7 B. 180 C. 200 D. 190

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Economics: Industrial Economics

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In a market operating under quantity competition there are 2 firms (Cournot duopoly). The cost structure of firm 1 is given by C1(q1) = 675 + 60q1 + (q1)^2 and that of firm 2 is given by C2(q2) = 375 + 20 q2 + 5 (q2)^2. The inverse demand function is P = 300 - 2 Q1, where Q = q1 + q2.

 

Define the profit maximization problem that every firm faces and solve for the respective best response functions. Use these (or the first order condition directly) to answer the following:

1. The Nash Equilibrium quantity produced by firm 1 q1* is

Choices:

A. 33.3

B. 38.3

C. 40

D. 35

 

2. The Nash Equilibrium quantity produced by firm 2 q2* is

Choices:

A. 15

B. 53.3

C. 20

D. 21.7

 

3. The Nash Equilibrium price is

Choices:

A. 126.7

B. 180

C. 200

D. 190

 

4. The Lerner Index for the market is closest to

Choices:

A. 0.29

B. 0.66

C. 0.43

D. 0.57

 

Thank you for your help and support Instructor Agent!

 

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