Demand in a Market Dominated by Two Firms (A Cournot

question 44

Essay

Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P = 300 - 4(Q₁ + Q₂), where P is the market price, Q₁ is the quantity demanded by Firm 1, and Q₂ is the quantity demanded by Firm 2. The marginal cost for each firm is constant; MC = $60.
(a) Derive an equation for Firm 1's revenue.
(b) Determine each firm’s profit-maximizing output level and the resulting market price.
(c) What is the profit-maximizing level of output if the duopoly firms merged and formed a single monopoly?

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