question archive Suppose there are two firms in a market who each simultaneously choose a quantity
Suppose there are two firms in a market who each simultaneously choose a quantity
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Suppose there are two firms in a market who each simultaneously choose a quantity. Firm 1's quantity is q1, and firm 2's quantity is q2.
Therefore the market quantity is Q = q1+ q2. The market demand curve is given by P = 100 - 4Q. Also, each firm has a constant marginal cost equal to 28. There are no fixed costs.
The marginal revenue of the two firms is given by:
- MR1 = 100 - 8q1 - 4q2
- MR2 = 100 - 4q1 - 8q2.
a. How much profit does each firm make?
b. Suppose Firm 2 produced 10 units of output. How much output should Firm 1 produce in order to maximize profit?
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