There are two firms (Firm A and Firm B) competing in a Cournot game. The market demand is P=400-2Qa- 2Qb. The marginal cost for both firms is constant and is equal to $40. a) Derive the reaction functions for these firms. b) Draw the reaction functions on the graph, as done in class. Label the axes clearly and indicate which curve belongs to each firm. c) Solve for the Cournot equilibrium quantities for each firm and the market price.

There are two firms (Firm A and Firm B) competing in a Cournot game. The market demand is P=400-2Qa- 2Qb. The marginal cost for both firms is constant and is equal to $40. a) Derive the reaction functions for these firms. b) Draw the reaction functions on the graph, as done in class. Label the axes clearly and indicate which curve belongs to each firm. c) Solve for the Cournot equilibrium quantities for each firm and the market price.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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