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A US Company and a Japanese Company Sells an Identical Product

Question 17

Multiple Choice

A U.S. company and a Japanese company sells an identical product in the Japanese market. The inverse demand equation for this product is PJ = 5 !0.2(QJUS + QJ J) . Suppose that the best-response functions of the U.S. and Japanese companies are QJUS = 5 !0.5QJ J and QJ J = 7.5 !0.5QJUS, respectively. The Cournot-Nash equilibrium {QJ US, QJJ} in the Japanese market is:


A) {6.67, 6.67}.
B) {3.33, 8.33}.
C) {8.33, 3.33}.
D) {1.67, 6.67}.
E) {6.67, 1.67}.

Correct Answer:

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