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(Cournot Duopoly)Suppose there are two firms operating in a market.The firms produce identical products. The marginal cost for each firm is constant at MC =

(Cournot Duopoly)Suppose there are two firms operating in a market.The firms produce identical products. The marginal cost for each firm is constant at MC = 16.There are no Fixed Costs.Also, the market demand is given by P = 100 -4Q, where Q= q1+ q2is the total industry output.

The following formulas will be useful:

If market demand is given by P = a -bQ, then

  • MR1= a - 2bq1- bq2
  • MR2= a - bq1- 2bq2

Assume the firms choose their quantities simultaneously.

How much output will Firm 1 produce in the Cournot-Nash Equilibrium?

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