Two Firms Share a Market with Demand Curve Q=90-0

Multiple Choice

Two firms share a market with demand curve Q=90-0.5P. Each has cost function C(q) =900+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given. Suppose that firm 2 produces 20 units of output. How much should firm 1 produce in order to maximize profits, given that q₂= 20?

A) 45/3
B) 23/3
C) 23/2
D) 45/2