Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q₁ + q₂ (Firm 1's output = q₁; Firm 2's output = q₂). Each firm has marginal costs of $25. In the Nash equilibrium in this market, the market price is $____.

Question

Quizplus · Accepted Answer

The Nash equilibrium in this market is where each firm produces q₁ = q₂ = 25. This is because each firm takes the output of the other firm as given and maximizes its own profit. The market price is then P = 100 - 10(25 + 25) = $50.

Two Companies Are the Only Snowplow Merchants in a Small