Suppose that firms A and B are Cournot duopolists in the salt industry. The market demand curve can be specified as $P = 200 - Q _ { A } - Q _ { B }$ . The marginal cost to each firm is $40. Suppose that firm A is producing 100 units. What is firm B's profit-maximizing quantity?
A) 100.
B) 60.
C) 30.
D) 20.

Question

Quizplus · Accepted Answer

Firm B's profit-maximizing quantity is found by setting its marginal revenue equal to its marginal cost. The marginal revenue for firm B is derived from the demand curve: $MR_B = 200 - Q_A - 2Q_B$. Setting $MR_B = MC_B$, we have $200 - 100 - 2Q_B = 40$. Solving for $Q_B$, we get $2Q_B = 60$, so $Q_B = 30$.

Suppose That Firms a and B Are Cournot Duopolists in the Salt