Question

Consider two identical Cournot firms that each have a marginal cost of 20, facing the market inverse demand function: P=120-Q What is the quantity produced for each firm? Round your answer to the nearest 1 decimal places.

Answer 1

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Solution,

P- 120 - market Inuerse dimand funition where a G + O2 pa 120-01-02 ML = 20 the Equilibrium londition is mr=mc. Total Meenue of firm first TRI = Pro - (120-0-02) ou 1200, -0,2 -0.02. MR = a TR - 120 - 20,- Q2 a & MC: 20 120-20, -0 = 20 120-20 -0 201 100 - 02 - 201 = 100 - 02 50-0.50 - firm ist reaction funeh It Total revenue of second from TR₂ = P²0 [120 - 01-02) or 1 2002 0, -0,2 MR = 2TR2 120 204 dor MR=mc = 20 120 - Q 202-20 120-20-01 - 202 O, = 50-0.50, firm Ell reaction to fure" Put Both form reaction function into each other

0, - 50-0.58, 4 02: 50-015, Q1=50-015 (50-0.50A) + 2. Q, =50-25 t 025 Q -0.25Q = 25 0758, =25 - 25 s 3:33 9.5 Similarly 02=50-0.50, 0 =50-0.5(50-0.5O2) 3 4 =50-25t0.250 O2 -0.250 = 25 8.75 02 =25 O2 = 25 2.33 7-5 broduced 5 "quantity by Each firm firm is 33 units of outfurt.