The Inverse Demand for Tacos Is Given by P =

Multiple Choice

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C₁ = 0.01q₁², where q₁ is the number of tacos it brings to market. Shop 2's cost function is given by C₂ = 0.01q₂², where q₂ is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot) . Let Q = q₁ + q₂. In equilibrium, the market price is $____.

A) 5
B) 3
C) 2.5
D) 1.5