Two firms producing a homogeneous product are the only firms on the market. The inverse

demand for the product is equal to: P = 680 - 0.5Q, where, Q is the total demand on the market,

which consists of the demand for the product of Firm 1 ( q1) and the demand for the product of

Firm 2 ( q2 ). Q = q1 + q2. The firms have identical cost structures: C1 = 20q1 and C2 = 20q2. The

firms compete through output (Cournot).

Instructions:

a) What will the output and price level be in equilibrium, if the two firms compete by setting

quantities and choose how much to produce simultaneously?

b) How high are the profits of the firms?