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The market demand function is given the following equation: P = 3200 - 2Q where Q is the industry's output level. Suppose initially this
The market demand function is given the following equation: P = 3200 - 2Q where Q is the industry's output level. Suppose initially this market is served by a single firm. Let the total cost function of this firm be given the function C(Q) = 200Q. The firm's marginal cost of production (MC) is equal to the firm's average cost (AC): MC = AC = 200. Now suppose we are back in the world of Cournot with two firms choosing their output levels simultaneously. However, this time firm 1 is a low-cost firm with AC = MC = 160 and firm 2 is a high-cost firm with AC = MC = 240. Marginal profit function of firm 1: 3040 - 4Q12Q2 Marginal profit function of firm 2: 29602Q1-4Q2 What will be the quantity produced by firm 2 in a Cournot duopoly model? A. 520 units B. 480 units C. 460 units D. 440 units
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