Consider a Cournot Duopoly with the Following Inverse Demand Function

question 72

Multiple Choice

Consider a Cournot duopoly with the following inverse demand function: P = 50 − 0.2Q₁ − 0.2Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i) = 2.Based on this information,firm 1 and 2's reaction functions are:

• A) r₁(Q₂) = 120 − 0.5Q₁ and r₂(Q₁) = 120 − 0.5Q₂.
• B) r₁(Q₂) = 120 − 0.5Q₂ and r₁(Q₂) = 120 − 0.5Q₁.
• C) Q₁ = 240 − 0.75Q₂ and Q₂ = 240 − 0.75Q₁.
• D) Q₁ = 240 − 0.5Q₂ and Q₂ = 240 − 0.5Q₁.

---

Definitions:

Uniform Commercial Code

A standardized set of laws that regulate financial contracts and transactions in the United States to facilitate commerce.

Time Of Payment

The specific date or schedule agreed upon for payment to be made in a transaction.

Bearer Instrument

A type of negotiable financial instrument that entails payment to whoever holds the document, without requiring the transfer to be recorded, distinguishing it from other securities which are registered to specific owners.

Payable

Refers to an amount of money that is owed by a person or company to a creditor, typically categorized in financial statements as current liabilities.