Consider a duopoly market with 2 firms. Aggregate demand in this market is given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B. Assume the firms compete a la Cournot. a)Find the inverse demand in this market. Note that marginal revenue for both firms is given by MRA=500-2QA-QB, MRB=500-QA-2QB. b)Describe what a best-response curve is and how to find it. c)Derive the best-response function for each firm.
Consider a duopoly market with 2 firms. Aggregate demand in this market is given by
Q = 500 – P,
where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B.
Assume the firms compete a la Cournot.
a)Find the inverse demand in this market.
Note that marginal revenue for both firms is given by
MRA=500-2QA-QB,
MRB=500-QA-2QB.
b)Describe what a best-response curve is and how to find it.
c)Derive the best-response function for each firm.
hi, can you answer part a.b,c please. If possible, please answer this question in typing as i can't read hand -written answers, thanks
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