Q1

Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities and have a constant marginal cost of 30. Demand in the industry is given by 3(p) = 195 - p12. Let q1 and q2 denote the quantities of rm 1 and 2, respectively. Derive the best resonse functions and the Nash equilibrium in quantities. Which of the following statements are correct? [There may be more than one correct statement] 3 "he Nash equilibrium quantity for each firm is 30. "he Nash equilibrium quantity for each firm is 40. None of the above. "he reaction function of firm 1 is given by q1 = 60 - (q2)/2. "he Nash equilibrium quantity for each firm is 60. 'he reaction function of firm 1 is given by q1 = 90 - (q2)/2. j 3 j 3 j 3 "he reaction function of firm 1 is given by q1 = 45 (q2)/2. Two firms are competing in a Cournot duopoly. Both firms have the same constant marginal cost. The market demand is linear. Suppose the constant marginal cost of firm 2 is increasing. Which of the following statements are correct? [There may be more than one correct statement.] O The market price goes up. O The quantity of firm 1 goes up and the quantity of firm 2 goes down. O The market price goes down. O The quantity of firm 1 goes down and the quantity of firm 2 goes up. O The quantity of firm 1 and the quantity of firm 2 both go up. O The quantity of firm 1 and the quantity of firm 2 go down. O The market price stays the same