Duopolymarket.

Let Q₁be the output of the first firm and Q₂be the output of the second firm. Market demand is now given byP = 500 - Q₁- Q₂.

Assuming the second firm has the same cost as firm 1, i.e.,MC₁= MC₂= $50.

Themarginal profit functionsare:

Firm 1 =450 - 2Q₁- Q₂

Firm 2 =450 - Q₁- 2Q₂

What will be theprofitearned by each firm in the Cournot equilibrium?

1. $25312.5
2. $27500
3. $22500
4. $18625