The Inverse Demand in a Cournot Duopoly Is P =

question 4

Multiple Choice

The inverse demand in a Cournot duopoly is P = a - b(Q₁ + Q₂) , and costs are C₁(Q₁) = c₁Q₁ and C₂(Q₂) = c₂Q₂. The government has imposed a per-unit tax of $t on each unit sold by each firm. The tax revenue is:

• A) t times the total output of the two firms should there be no sales tax.
• B) less than t times the total output of the two firms should there be no sales tax.
• C) greater than t times the total output of the two firms should there be no sales tax.
• D) None of the answers is correct.

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