DSE 2005 Question 9: Monopolistic competition and oligopoly
Consider a Cournot duopoly with inverse market demand p=a−b(q1+q2), where a>4 and b>0 are constants, p is the market price and qi is firm i's output. Firm 1's cost function is C1(q1)=q1 and Firm 2's cost function is C2(q2)=2q2. In Cournot equilibrium, the outputs are
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Consider a Cournot duopoly with inverse market demand p=a-b(q₁+q₂), where a>4 and b>0 are constants, p is the market price and qᵢ is firm i 's output. Firm 1 's cost function is C₁(q₁)=q₁ and Firm 2 's cost function is C₂(q₂)=2q₂. In Cournot equilibrium, the outputs are (A) q₁=a/3b and q₂=(a-3)/3b (B) q₁=(a-3)/3b and q₂=a/3b (C) q₁=2a/3b and q₂=(2a-3)/3b (D) q₁=(2a-3)a/3b and q₂=2a/3b
Also written as: Consider a Cournot duopoly with inverse market demand p=a-b(q_1+q_2), where a>4 and b>0 are constants, p is the market price and q_i is firm i 's output. Firm 1 's cost function is C_1(q_1)=q_1 and Firm 2 's cost function is C_2(q_2)=2q_2. In Cournot equilibrium, the outputs are
Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.
What this question tests
This question is on Cournot competition, part of Monopolistic competition and oligopoly in Microeconomics.
Firms choosing quantities simultaneously, reaction curves, and equilibrium as the number of firms or costs change.
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