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In: Economics

Two firms are in a market and are able to compete on quantity, as is typical...

Two firms are in a market and are able to compete on quantity, as is typical in a Cournot Oligopoly. The market demand curve is Q = 30 – 3P. The market marginal revenue curve is: MR= 10-(2/3)Q

The two firms have different marginal costs. Firm A has a marginal cost of $6, while Firm B has a marginal cost of $9.

(a) Find the demand curve that Firm A faces.

(b) Assume that Firm A knows that Firm B will produce 2 units of output. They are not cooperating with each other. How much output should Firm A produce? The marginal revenue curve

associated with the demand function you found in question 1a is: MRA = 10 - (2/3)qA - (1/3)qB

(c) What will be the market price of this good?

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Expert Solution

Rahul Sunny answered 2 years ago
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