Consider a Two-Firm Oligopoly Facing a Market Inverse Demand Curve

question 15

Multiple Choice

Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 - 2(q₁ + q₂) , where q₁ is the output of Firm 1 and q₂ is the output of Firm 2. Firm 1's marginal cost is constant at $12, while Firm 2's marginal cost is constant at $20. In Cournot equilibrium, how much output does each firm produce?

• A) q₁ = 20; q₂ = 14
• B) q₁ = 16; q₂ = 12
• C) q₁ = 18; q₂ = 8
• D) q₁ = 14; q₂ = 11

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