13.7. Lets consider a market in which two firms compete as quantity setters, and the market demand...

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13.7. Let’s consider a market in which two firms compete as quantity setters, and the market demand curve is given by Q ! 4000 " 40P. Firm 1 has a constant marginal cost equal to MC1 ! 20, while Firm 2 has a constant marginal cost equal to MC2 ! 40.

a) Find each firm’s reaction function.

b) Find the Cournot equilibrium quantities and the Cournot equilibrium price.

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Microeconomics

ISBN: 9780470563588

4th Edition

Authors: David Besanko, Ronald Braeutigam

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