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A Cournot duopoly with homogeneous products has an inverse demand curve P = 12 - (QA + QB) and costs are CA(QA) = 2QA and

A Cournot duopoly with homogeneous products has an inverse demand curve P = 12 - (QA + QB) and costs are CA(QA) = 2QA and CB(QB) = 4QB.

a. Define the characteristics that make up a Cournot duopoly.

b. Determine the reaction function for each firm.

c. Calculate each firm's equilibrium output and the market's equilibrium price. Calculate each firms profits.

d. If the market elasticity of demand is -1.33 and there is 1 firm in the industry rather than 2, what price is best for firm A to charge? Firm B?

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