Answer letter b only Two firms produce a homogenous product. Let p denote the product's price. The output levelof firm 1 is denoted by q1, and the output level of firm 2 by q2. The aggregate industryoutput is denoted by Q, Q = q1 + q2. The aggregate industry demand curve for this productis given by p = 200 – Q.a. Assuming that firms are homogeneous with cost function C(qi) = 2qi, derive the bestresponse function for each firm. Show that Cournot-Nash equilibrium output for eachfirm is symmetric. Find the Cournot-Nash equilibrium aggregate output and price. Verifythat given similar cost functions, equilibrium profits for each firm is symmetric as well.Assuming that firms are heterogeneous with unit cost for firm 1 is 2 and the unit cost forfirm 2 is 4, show that firm 1 will produce more than firm 2. Find the Cournot-Nashequilibrium aggregate output and price. Verify as well that firm 1 earns a higher profitthan firm 2.

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nswer letter b only

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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