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There are two parts to the question . Suppose that there are two firms in an industry that produce an identical product. The output of
There are two parts to the question .
Suppose that there are two firms in an industry that produce an identical product. The output of Firm A is denoted by Q4, and the output of Firm B is denoted by mg, The cost function of Firm A is given by {3(qu = qAZ and the cost function of Firm B is given by C(qBJ = g .932. Let Qdenote the total market output, and Pdenote the price. The inverse demand curve in the market is given by P: 420 0. Based on the information given, answer all the questions below: a) Calculate the CournotNash equilibrium output level and profit for each firm. (4 marks) b) Compare the profits earned by each firm in part (a) above. Is this outcome what you should expect, given the information? Explain what you think. (2 marks)Step by Step Solution
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