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Consider a Two-Firm Oligopoly Facing a Market Inverse Demand Curve

Question 15

Multiple Choice

Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 - 2(q1 + q2) , where q1 is the output of Firm 1 and q2 is the output of Firm 2. Firm 1's marginal cost is constant at $12, while Firm 2's marginal cost is constant at $20. In Cournot equilibrium, how much output does each firm produce?


A) q1 = 20; q2 = 14
B) q1 = 16; q2 = 12
C) q1 = 18; q2 = 8
D) q1 = 14; q2 = 11

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