Two Firms Share a Market with Demand Curve Q=120-0

question 35

Essay

Two firms share a market with demand curve Q=120-0.5P. Each has cost function C(q)=1000+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given.

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Definitions:

Zero-profit Equilibrium

A situation where firms in a perfectly competitive market earn just enough revenue to cover their total costs.

Consumer Preference

The inclination of consumers to favor certain products, brands, or services over others, influenced by tastes, values, and socio-economic factors.

Capital Inflow

The movement of funds into a country, typically in the form of investments, that can be used for further economic development.

Capital Outflow

The movement of assets out of a country, often in response to economic or political instability, seeking higher returns or safer investment climates elsewhere.