The Inverse Demand in a Cournot Duopoly Is P =

question 79

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 equilibrium output of each firm is the same as a situation where each firm's:

• A) demand increases by t.
• B) demand decreases by t.
• C) marginal cost increases by t.
• D) marginal cost decreases by t.

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