A particular market is served by two firms. The market demand curve is given by p = 200 - y. Each firm incurs a constant cost per unit of $50. The Cournot equilibrium solution is: A)p ^*= p ^*= 70. B)y ^*= y ^*= 20. C)y ^*= y ^*= 50. D)p ^*= p ^*= 50. 1 2 1 2 1 2 1 2

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In Cournot equilibrium, each firm produces where marginal cost equals marginal revenue. Given the demand curve p = 200 - y and constant cost of $50, the equilibrium output for each firm is 50, making total output 100 and price $100.

A Particular Market Is Served by Two Firms