Managerial Economics 13th Edition by James McGuigan,Charles Moyer,Frederick Harris

Exercise 2

Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function:
P = 600 -Q C Q D
where QC and QD are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are
TC C = 25,000 + 100Q C
TC D = 20,000 + 125Q D
Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm's output will not change).
a. Determine the long-run equilibrium output and selling price for each firm.
b. Determine the total profits for each firm at the equilibrium output found in Part (a).