The inverse market demand curve is P = 260 - Q, where Q is the output of Firm 1 and Firm 2, q₁ + q₂. The output of the two firms is identical.
a. Firm 1 and Firm 2 have the same cost structure: AC = MC = $20. If the firms are in Cournot competition, how much profit does each firm earn?
b. Now suppose that Firm 2's production costs increase to AC = MC = $80. If the firms continue their Cournot competition, how much profit does each firm earn?

Question

Quizplus · Accepted Answer

The Answer of The inverse market demand curve is P = 260 - Q, where Q is the output of Firm 1 and Firm 2, q₁ + q₂. The output of the two firms is identical. a. Firm 1 and Firm 2 have the same cost structure: AC = MC = $20. If the firms are in Cournot competition, how much profit does each firm earn? b. Now suppose that Firm 2's production costs increase to AC = MC = $80. If the firms continue their Cournot competition, how much profit does each firm earn?

The Inverse Market Demand Curve Is P = 260 -