The market demand for economics books is given by P = 12 − Q (a) Initially...

The market demand for economics books is given by P = 12 − Q

(a) Initially there is only one firm (a monopolist) operating in this market. The total cost of producing books for the firm is T C = 2Q. How many books will he/she sell in this market? What will be market price?

(b) Now, suppose a second firm enters the market. The two firms are now Cournot duopolists and they will produce quantities Q1 and Q2 respectively, where Q1 +Q2 = Q. Their total cost functions are T C1 = 2Q1 and T C2 = 2Q2. What are the firms’ reaction functions? How much will each firm produce? What will be the total quantity sold in the market and at what price?

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Expert Solution

Rahul Sunny answered 1 year ago

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