The Inverse Demand for Shampoo Is Given by P =

question 110

Multiple Choice

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C₁ = 0.05q₁², where q₁ is the number of bottles it brings to market. Firm 2's cost function is given by C₂ = 0.03q₂², where q₂ is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q₁ + q₂. In equilibrium, firm 2 will earn $ ____ in profit.

• A) 1,741.37
• B) 2,725.04
• C) 3,482.74
• D) 4,466.41

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