Orion and Zeda Are the Only Producers of a Unique

question 83

Essay

Orion and Zeda are the only producers of a unique product that is sold in a market where the inverse demand curve is P = 200 - 2Q.The firms produce identical products and have identical cost functions given by C(Q_i)= 4Q_i.The managers of each firm must decide on their outputs on Monday morning and then bring products to market by noon.
a.What is each firm's marginal revenue?
Marginal cost?
b.Equate each firm's marginal revenue to marginal cost.
c.Use your result in part (b)to solve for each firm's reaction function.
d.Use your results in part (c)to solve for the Cournot equilibrium levels of output for each firm.

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