For Company A, the long-run equilibrium output is and the selling price is $ . For Company B, the long-run equilibrium output is , and selling price is $ . At the equilibrium output, Company A earns total profits of $ and Company B earns total profits of $ . Therefore, the total industry profits are $ .
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:
P=200-Qa-Qb
where QAQA and QBQB, are the quantities sold by the respective firms and P is the selling
TCa=1,500+55Qa+Qa2 TCb=1,200+20Qb+2Qb2
Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm’s output will not change).
For Company A, the long-run equilibrium output is and the selling price is $ .
For Company B, the long-run equilibrium output is , and selling price is $ .
At the equilibrium output, Company A earns total profits of $ and Company B earns total profits of $ . Therefore, the total industry profits are $ .
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