Cournot Duopoly

Question 1

Consider two firms producing identical goods q with the same marginal cost of MC = 40.
They face a market demand of P = 100 - 2QD. Round answers to one decimal place.

1) What is firm 1's marginal revenue equation?

MR1 = - q1 - q2

2) What is firm 1's best response function to firm 2's output level?

q1BR = - q2

3) What is firm 2's best response function to firm 1's output level?

q2BR = - q1

4) What is the Cournot equilibrium market price and output?

P* = Q* =

5) What is each firm's Cournot equilibrium output and profit?

q* = Profit =

6) What are consumer, producer, and total surplus in the Cournot equilibrium?

CS = PS = TS =

7) What is the Cournot equilibrium dead-weight loss?

DWL =

8) The Cournot equilibrium is as the two firms are acting as .

Score = 0