suppose that two Cournot duopolists serve the Peoria-Dubuque route, and the demand curve for tickets per day is Q = 170 - 2p (so p = 85 - Q/2).Total costs of running a flight on this route are 850 + 10q, where q is the number of passengers on the flight.Each flight has a capacity of 80 passengers.In Cournot equilibrium, each duopolist will run one flight per day and will make a daily profit of
A)$400.
B)$425.
C)$170.
D)$800.
E)$1,750.

Question

Quizplus · Accepted Answer

In Cournot equilibrium, each duopolist will choose the quantity of output that maximizes its profit, taking the output of the other duopolist as given. The profit of each duopolist is given by:π = p * q - (850 + 10q)Substituting the demand curve into the profit function, we get:π = (85 - Q/2) * q - (850 + 10q)Taking the derivative of the profit function with respect to q and setting it equal to zero, we get:dπ/dq = 85 - Q - 10 = 0Solving for Q, we get:Q = 75Substituting Q = 75 into the demand curve, we get:p = 85 - Q/2 = 85 - 75/2 = 60Substituting p = 60 and Q = 75 into the profit function, we get:π = 60 * 75 - (850 + 10 * 75) = 400Therefore, each duopolist will make a daily profit of $400.

Suppose That Two Cournot Duopolists Serve the Peoria-Dubuque Route, and the Demand