Consider a Cournot Duopoly with the Following Inverse Demand Function

question 64

Multiple Choice

Consider a Cournot duopoly with the following inverse demand function: P = 10 − 0.5Q₁ − 0.5Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i) = 3.Based on this information,firm 1 and 2's reaction functions are:

• A) r₁(Q₂) = 7 − 0.5Q₁ and r₂(Q₁) = 7 − 0.5Q₂.
• B) r₁(Q₂) = 14 − 0.25Q₂ and r₁(Q₂) = 14 − 0.25Q₁.
• C) Q₁ = 7 − 0.5Q₂ and Q₂ = 7 − 0.5Q₁.
• D) Q₁ = 14 − 0.25Q₂ and Q₂ = 14 − 0.25Q₁.

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